Small Business Loans Help Wineries Keep Up with the Times

As the United States consumes ever greater quantities of wine, the lush farmlands of California have become a center of small business growth. Nationwide, 96% of wineries are categorized as “small, very small or limited production” and, as of 2016, 40% of U.S. wineries (4,653 out of 11,496) were located in California. Small wineries often supplement their income from winemaking with hospitality. Wine tours, stopping at wineries with tasting rooms, bed & breakfasts and gourmet restaurants, have become a staple of the upscale California tourist experience.

U.S. wine consumption has set new records regularly throughout this decade, reaching a new high of 949 million gallons in 2016.  Although wine consumption has grown at a slower pace in recent years than earlier in the decade, with 2017 wine sales up 2% over 2016, the industry got a boost from a sharp reduction in the excise tax on wine (a 21-69% reduction, depending on the size of the winery) in the 2018 tax reform.

Now Is a Good Time for Wineries to Expand

The wine industry is dynamic. It has an active mergers & acquisitions market with new, small producers constantly emerging. These new wineries fill the demand for the “unique” wine experiences the millennial generation craves. The industry puts considerable effort into divining the tastes of millennials, who make up over 40% of U.S. wine consumers, and that taste has had a profound impact, especially on small producers.

In response to the perceived demands of millennials, there have been changes in packaging and delivery methods, as well as in wines themselves. Organic wine is in high demand. One expert estimated that organic certification can add $3-4 to the price of a bottle. These changes, as well as the growing market, mean that this is a good time for small producers to upgrade and expand their facilities.

Small community banks are more likely to be willing to issue a loan to a winery owner seeking financing for expansion. Because wine is considered a higher risk than most other forms agricultural enterprises, qualifying standards will be stringent and the down payment required may be especially high. Industry experience is highly valued, however.

There are numerous finance companies that specialize in wineries. Their conditions are subject to negotiation, but are likely to be somewhat worse than a bank’s. In addition, most wineries will be eligible for a USDA Business and Industry loan. In January 2018, it provided financing at 5.25-9.25% interest and 20-40% down for up to 30 years.

Winery Financing Using the SBA 504 Loan

Since the vast majority of wineries are small businesses, they qualify for the Small Business Administration (SBA) 504 loan. The conditions of a 504 loan compare favorably with the other options available on the market. A 504 loan can be used to:

  • purchase land or buildings
  • construct, upgrade or renovate buildings
  • purchase equipment with a service life of ten years or more
  • refinance conventional debt

A 504 loan has three parts:

  • The first is a loan from a conventional lender for at least 50% of the total amount. You and that lender determine the amount and conditions of that loan, which becomes your first mortgage.
  • A Certified Development Company (CDC) like TMC Financing facilitates a separate SBA loan of 35-40% of the total, up to $5 million, at a fixed, below-market rate for a term of 10 or 20 years. (Soon there will be a 25-year option.) You can receive up to $5.5 million for projects eligible for the SBA’s Green Energy Program. This is your second mortgage.
  • Then you, the borrower, contribute 10-15% to the loan as down payment. Certain types of facilities are classified as single-purpose properties by the SBA and require a 15% down payment, such as wineries and vineyards

Conventional lenders find 504 loans attractive, since their first lien position in the loan reduces their risk substantially. This makes it easier to receive financing from them.

Green Wineries and the 504 Loan

The Green Energy Program encourages energy efficiency and conservation. By participating in it, a borrower is eligible to increase their loan to $5.5 million and exceed traditional project limits and receive up to an aggregate of $16.5 million in funding.  Harnessing solar power for your production or hospitality facilities, for example, would save money on utilities and add to your “green” appeal. By installing electric vehicle charging stations, you could provide a valuable service and tap into a customer base that is famously loyal.  

In the case of wineries, participation in the Green Energy Program could have marketing value as well, complementing a brand’s Earth-friendly organic image.

A project can qualify for the Green Energy Program in one of three ways:

  • Buy or construct a building that consumes 10% less energy than your current location
  • Make upgrades to the building you own to consume 10% less energy, or buy the building you now lease and do so
  • Buy or construct a building that produces 10% of the energy it consumes or that produces fuel to reduce fossil fuel consumption, or buy equipment to do so at your current location

The accessibility and green component of the 504 loan program make it ideal for winery expansion. Besides having manageable conditions, the Green Energy Program offers an exceptional opportunity to receive financing for future rounds of expansion. Winery owners should give it careful consideration when examining loan options.

You can find out more about the 504 loan, the Green Energy Program and how they can help your winery business from one of TMC Financing’s 504 loan experts. TMC is an SBA Premier Certified Lender and a high-volume loan provider. With over 35 years of experience, TMC can help you find the financing that is best for you and guide you through the 504 loan process. Contact TMC Financing today.


Barbara Morrison, a local small business advocate and civic leader, founded her first company TMC Financing in 1981. TMC is a Certified Development Company that provides commercial real estate financing to small business owners via the SBA 504 Loan Program. TMC consistently ranks among the top certified development companies nationwide, and has funded projects worth more than $9 billion across California and Nevada. Nearly 5,000 small businesses have benefitted from this financing, resulting in the creation of an estimated 50,000 jobs. TMC is also the No.1 SBA 504 hotel lender in the United States. Barbara is also the founder of Working Solutions, a Bay Area microlender whose mission is to provide micro entrepreneurs, particularly low-income individuals, women and minorities, with the access to capital and resources they need to start a successful business.
Barbara Morrison