In the first eight months since they joined the U.S. wine industry for winery and vineyard financing in 2015, Live Oak Bank shot to the top, becoming the number one Small Business Administration (SBA) lender to wineries and vineyards in the country. *
“It’s because we knew small wineries were underserved,” says Domain Expert Jeff Clark. “The wine lending institutions have gravitated towards larger wineries over the years when, as we all know, the vast majority of wineries and vineyards are smaller, family-owned businesses.”
In the Fields
Characterizing itself as “not your ordinary bank,” Live Oak is branchless. Employees work in the field and in the industries they each serve. In the wine industry, this means that Live Oak loan officers are literally walking vineyards, tank rooms and crushpads with their clients. They match what they learn about each winery’s operations with their vast knowledge of how a bank can serve customers’ individual needs.
Senior Loan Officers Tracy Sheppard and Randall Behrens, along with Clark, are living and working in the heart of the industry in California; however, they travel all over the country visiting winemakers and craft beverage producers to understand their unique viticulture and financing needs.
“I went to the Texas Hill Country wineries recently and they seemed astounded that I’d be there to see them,” Clark reports. “I said ‘why wouldn’t I be here? You stand between Austin and San Antonio, two of the biggest most thriving cities in the country, and you make great wines and need to grow. Of course I’m here.’”
Another area that the Live Oak team was delighted to find was beautiful southern Oregon. “Sure the Willamette Valley is courted and well-served by larger, more traditional banks, but who is looking to help the Rogue region and the rest of Oregon which are also producing incredible wines?” asks Clark.
Sheppard mentions that, “Live Oak was recently named the number one bank to work for in America. And that’s because we work in the industries we are passionate about. I get to travel and meet every client, and really get to see the passion of each winemaker or craft brewer I meet. Understanding a customer’s needs and their passion, and matching it with the non-traditional ways we can build financing for them, means we all get to grow.”
Construction, Expansion and Equipment Financing
Behrens most frequently works with wineries and craft breweries facing the challenges of expansion, which is usually a result of their own success. He explains that winery clients often need longer term credit to build or expand, and construction and expansion financing is a specialty for Live Oak. The bank can offer flexible equity requirements and longer terms to customers whose building or market expansion needs they truly understand.
Some of the equipment financing options that Live Oak Bank has developed through their understanding of winery clients include:
- Term and amortization based on useful life greatly lowering debt service
- Equipment deposit and completion payments;
- Interest-only, multi-disbursement payments during the equipment manufacturer’s construction periods.
Live Oak has a dedicated construction group to assist wineries with their expansion needs. Each relationship manager works directly with the borrower, architect, general contractor and equipment vendors to monitor the disbursements and progression of project through completion. The high level of expertise and problem solving capabilities allows for a seamless process from start to finish.
Vineyard acquisition financing is a large focus for Live Oak. It makes sense for some wineries to own the fruit source when it comes to quality and quantity. The winery lending team has many years of experience financing vineyards throughout the region.
Clark, a veteran of the wine industry since 1993, says the Live Oak team understands the opportunities and risks of the wine industry. They see firsthand the rapidly changing consumer preferences and alternative distribution chains both domestically and internationally. He finds winemakers to be some of the most entrepreneurial individuals he has ever served, and loves their talent, creativity, and varied backgrounds. Customers tell him, “You guys come in and ask all the right questions. You really understand our industry.”
Cases in Point
Tom and Kerry Eddy escaped the corporate world in the 1990s to start their winery in St. Helena, California.
“We thought most banks only want to lend you money if you have a lot of money. We didn’t have a lot of money,” Kerry Eddy says. “We had a dream and a good business plan, but while we built it, how were we going to function?”
“Our Cabernet Sauvignon,” Tom Eddy explains, “ages in oak for three years, and then for another two years in bottle before we release it. For a small business, that creates a huge cash flow worry while you wait for release and build your business. What Live Oak offered was the chance to look at us as individuals, our business as an individual and without a ‘monthly report,’ they believed in our plan and they believed in us.”
The winery has grown to 5,000 cases annually of premium Napa Valley wines, 70% sold direct to customers who visit Tom Eddy Winery to receive a unique experience and buy a quality product.
Paul and Kathryn Sloan produce small lot of highly rated artisan wines under their Small Vines label. They source fruit from their estate vineyard in Sebastopol and other select vineyards in West Sonoma County. Their goal was to build a winery on the estate vineyard parcel. Live Oak Bank was able to provide a construction loan based on their comfort with the Sloan’s business operation, their industry expertise and good character. The new facility will allow them to consolidate operations while expanding and improving their tasting room.
Joe Dobbes is an acclaimed Oregon vintner and a multigenerational Willamette Valley farmer. Joe identified a need for a state-of-the-art mobile bottling unit to serve the growth of the local wine and craft beverage business. This was a startup venture which greatly reduced his lending options. Joe had a solid business plan and vast industry connections with which to launch the operation. Live Oak was able to provide the financing in a timely fashion allowing Joe to meet operational deadlines.
Mike Draxton is a wine industry veteran with extensive experience in the vineyard operations and bulk wine production. He developed a unique business model that addresses the needs of both grape growers and bulk wine buyers. In order to meet demand, he needed to greatly expand his operations which included adding a large tank facility. Plus, he needed to be ready for the 2016 harvest.
The different components of the structure as well as subsequent changes during the project made the deal more complex than an average construction loan. Live Oak Bank’s dedicated construction team provided construction financing that allowed Mike to start the project on time and keep it on track.
Unique. Creative. Individual. Building. Expanding. Finding new markets. All terms used by Live Oak Bank to define its winery clients. Terms that can also be used to describe the new world of banking as provided by Live Oak Bank.
Learn more about your winery and vineyard financing options and meet your lending experts.
*Based on SBA data acquired via FOIA requests.