Where we are, an update
We are in the midst of an adventure. This one has been an uphill climb the entire way and continues to be. I know quite a bit of you have been inquiring about where we stand and what is going on with Alexandria Brewing Company. Hopefully this will answer your questions. Some specifics I still cannot get into such as our planned location, but this will offer you a glimpse at some of our day to day struggles. With all of that said, here we go, some of this gets a little technical, feel free to skip ahead if you don’t like details…
I am going to start with our financing situation. With our successful Kickstarter, we were able to bring on four investors. After we paid for all of our costs for the Kickstarter campaign, including shipping, we were not left with that much. We have paid for countless numbers of test batches, professional copies of our business plan, dinners with potential investors, and attorney fees (the most costly of all). This led us to a place where we were able to find the four best people to invest in our vision. So, we have a decent amount of funds in an escrow account awaiting a larger cash injection. That leads us to the bank.
Our plan is reliant on bank financing to accomplish what I want to do since it requires more than we were able to raise from our investors. We have talked with numerous banks and thought we found one that worked for us. We were at the finish line when, out of nowhere, they decided to back out. Coming from the banking industry, my best guess is that they have recently financed two other breweries, one is established, the other is being built now. They are a smaller, newer bank and may not want to put too many eggs in one basket. Now we are working with another local bank and things are looking promising once again, but we are still in the beginning phases.
So, why not a larger bank? We have approached three larger banks and they all push us towards the SBA 7a program versus the SBA 504 that we want. The differences between these two programs are what they are used for and the interest rates. With the 504, we are guaranteed a low fixed rate. We put 10% down, we get 40% financed from a CRC (community reinvestment corporation), and the other 50% from the bank. This loan is used strictly for hard assets, meaning we cannot finance anything like our raw materials or merchandise with it. The 7a lets us finance everything but has a much higher rate. Our plan is to do the 504 and have line of credit, plus our leftover cash to cover our working capital. The smaller banks want the 504 because they are secured by the CRCs which are backed by the federal government. The big banks like the 7a because they make a lot of money on it and can spread that risk over several businesses.
Our current plan is to buy a larger piece of land that has an old farmhouse on it, build a taproom in said house, put our production facility in the basement, and install a DME (Diversified Metal Engineering) 5BBL 2 vessel brewhouse that is decoction capable. Traditionally, decoction requires at least a 3 vessel system, but DME has engineered our system to work as a typical 2 vessel system with step infusion most of the time (mash /lauter tun vessel & boil kettle whirlpool vessel). However, when we switch to a decoction mash (http://www.braukaiser.com/wiki/index.php?title=Decoction_Mashing), it is a mash/boil kettle/whirlpool and lauter tun setup.
Our next issue comes in with if we have an issue with this bank. We do not anticipate this, but it is a possibility. The biggest issue any new brewery faces right now is the market being labeled “over saturated.” While in Kentucky this isn’t true at all, some people believe Cincinnati is heading that way. Most experts believe Greater Cincinnati can support quite a bit more, especially “neighborhood breweries” which are typically 3-15 BBL sized systems. If we have a problem with this current bank, we will go for a smaller system and lease our location. We are still looking for a place in this situation but will go for a brewhouse similar to the one that Darkness Brewing uses. This is a 3 BBL brewhouse that we hope we can figure out a way to step infuse on.
So, there you have it. Our entire situation laid out. I hope this explains everything to you. I know the “step infusion” and “decoction” parts may not make sense to everyone who reads this, know it is part of the brewing process and if you are intrigued, feel free to research it. I guarantee you, even on a home brewing level, you will find more information than you ever thought possible. If you have any questions about any of this, please comment below. As always, we appreciate your patience and support throughout this whole process.
Cheers,
Andy Reynolds