Wine Industry Articles
Growing a relationship with your financial source
April 2004
by Jim Hansen, BDO Dunwoody LLP
For many members of the winery industry, there is a pressing need for capital to grow the business. It might be for more acreage, to buy farming implements, juice processing equipment or another purpose. In any case, it can be frustrating when an excellent opportunity – such as some suddenly-available land – goes to another winery because financing was not available.
Most winery owners think “big banks” when they think “financing,” but they should also consider credit unions, local banks, and government institutions such as the Business Development Bank of Canada.
In looking for financing, it is important to see the world from the perspective of the financial source. Most financiers deal with a wide variety of industries every day, and will need to be educated about the industry in general, and your business in particular. The financier may be concerned about your business’s vulnerability to the weather and growing conditions, and the difficulty of forecasting revenue. Tell the financier how you deal with these issues, possibly through insurance and forward-buying of imported grape juice.
Point out the strengths of the sector, which include rising demand and the growing reputation of BC wines, which increase both the market and the pricing that is attainable.
Each financier has a “portfolio” of loans, and you need to be able to show her or him how your loan will fit into that portfolio. Some assets you want to buy will start showing a return on investment immediately, such as mechanical picker. Others, such as land not now being used for grapes, will take longer to show a return.
The financier needs some loans that will provide quick return and some with a long-term view – so be sure the he or she understands how you can be a solution to his or her portfolio needs.
The financier will likely have many proposals on the desk at any one time, and you must be convincing about why yours should go to the top of the pile.
By thinking of the situation from the financier’s point of view, you are more likely to get an “approved” stamp on your financing application.
Jim Hansen is a Partner in the Kelowna BC office of BDO Dunwoody LLP. He is involved in all areas of client service including accounting, auditing, taxation and business consulting. He can be reached at tel. 250.763.6700; jhansen@bdo.ca.
