We at GRP Capital are continually examining our economic climate, determining the most effective way to secure debt financing for expansion. In Part One of our series, we discussed business diversion and what businesses are attractive to lenders – this week we’ll be focusing on our recent closing of a liquor store.
Why are Liquor Stores Great Opportunities?
• Pandemic-proof: Liquor stores attract customers, even when the bars and restaurants are closed. In fact, they see more diverse foot traffic when other options for drinking out “dry up”. In addition, most state and local laws forbid the consumption of liquor in the stores, which further protects the employees and the public. One of the first loans post-COVID-19 that we closed was a liquor store in Georgia. A successful liquor store should continue to be profitable, even if and when the virus escalates in the future.
• Adaptable: Liquor stores have built in systems for security that can be used to restrict touching of merchandise. A skilled manager can capitalize on liquor store offerings. Perhaps the store can expand into packaged treats, gift baskets or other items that are not easily available.
• No Price Wars: Many local and state governments regulate liquor stores, forbidding discounts. This preserves minimum price structures. As a result, a successful liquor store thrives because of its inventory and its service, not by trying to beat their competitors’ prices.
What should you do to get funding for your liquor store?
• Buying a store? If you are considering purchasing a store, get to know the business well. How healthy is it? How have the revenue and expenses fluctuated before and during the pandemic? Did the managers make any operational changes or did they not? Consider whether you would be able to match or exceed the management skill of the current owners.
• If you currently own a liquor store: Determine if now is a good time to refinance debt. Interest rates are historically low and many lenders are willing to fund liquor store loans. You should also consider if this is a time to renovate or expand your liquor store, increasing your ability to sell more diverse products that are in higher demand. You may also utilize money to retrofit your store set up to separate employees and customers and to create greater opportunities to conduct business “touchlessly”.
• Prove your Management Experience: Banks are more comfortable lending to proven managers. A management resume detailing experience and accomplishments is a common forum to highlight your ability to manage. It’s also critical to demonstrate your flexibility. Can you quickly pivot under changing social and economic conditions? Lenders like reviewing case studies and business plans, which help demonstrate that you have put time and thought into all possibilities.
• Keep an Eye on your Credit Worthiness: A borrower who actively monitors their credit will naturally be a more qualified borrower. Be sure that you remain credit healthy by keeping your debts manageable and staying on top of bills. Many borrowers forget that revolving credit, as well as medical debts, affect creditworthiness.
If you are interested in the liquor store business, now is the time to act. Read more about other aspects of finding funding in today’s climate here: