How to Finance Liquor Store Inventory

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Financing comes in two forms: loans or investors. A loan is given by either a financial institution, such as a bank or credit union, or from a person. The issuer of the loan is called a creditor, and he expects the return of his money, plus interest, over a predetermined payback schedule. Investors, on the other hand, purchase a percentage of your liquor store, and are entitled to share in the store's profits. At the same time, they share the risk of loss.

Decide whether you want to finance your liquor store inventory through loans or investors. There are pros and cons to each method. If you bring on investors, you lose part of your ownership and have to make joint decisions with your co-investors. If you take on loans, you increase your risk.

Decide exactly how much financing you want. This will make you appear more knowledgeable about your business than a store owner who doesn't know how much cash he needs.

Create a plan for what you will do with the financing, including what type of liquor you will buy. Include details such as price quotes from suppliers. If you have the data, include a market analysis of what types of liquor sell the best in your store's geographic area or at a particular time of the year.

Prepare a report that shows your previous store sales, if applicable. The report should show revenue breakdowns based on nights of the week, times of day, and types of liquor. It should also track your sales-per-square-foot of store, and highlight any improvements.

Choose collateral to secure the loan, if you decide to ask for a loan. Most lenders will want the loan secured through a house, mutual funds, or other easily collectible collateral.

Write and sign an agreement between yourself and the lender or investor.

If you use a lender, make sure the agreement specifies the original loan amount, the date that you'll get the loan, the number of repayments you need to make, the day and month you'll start making repayments, the repayment time increments (monthly, weekly), how much of each repayment applies to principal and how much applies to interest, the date that all the principal and interest is due, grace period terms and conditions, and the conditions, if possible, for amending or renegotiating the agreement.

If you bring an investor on board, ensure the agreement outlines his responsibilities in terms of work or effort expected from him, as well as what share of voting rights he has within your company.


  • Investing and borrowing always carries risk, including risk of principal loss.