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Next on tap for St. Louis craft brewers: barrels of potentially troubled loans

It appears the nation's bar tab is now coming due as fallout from the COVID-19 pandemic intensifies to historic proportions
Credit: SLBJ

ST. LOUIS — A consistent storyline to the economic rebound over the past decade has been the emergence of a fast-growing cornerstone on virtually every Main Street in America: the local brewery.

It appears the nation's bar tab is now coming due as fallout from the COVID-19 pandemic intensifies to historic proportions.

A Business Journals analysis of Small Business Administration lending over the past decade identified 3,184 loans totaling $1.57 billion to U.S. breweries. Approximately half of those loans were originated during the SBA's most-recent three fiscal years as taprooms, stainless-steel brewing tanks and home-grown IPAs became local symbols of economic vitality, often in once-dilapidated and abandoned industrial spaces dotting downtowns and commercial districts.


Loans and loan values originated to U.S. breweries through the SBA's 7(a) program. Between fiscal 2010 and 2019 the program supported $1.2 billion in loans, of which 75% were guaranteed by the SBA.

That momentum has been drained with the onset of social distancing and shelter-at-home orders due to the coronavirus, with hundreds of craft brewers predicting year-over-year sales declines of 60% on average in the weeks ahead. A recent Brewers Association survey of 900 breweries found some 28% have stopped production, while 61% have laid off workers.

Few are encouraged by the near-term outlook.

"On a good Saturday, we were doing probably $3,500 bucks," Derrick Langeneckert, CEO and head brewer of Alpha Brewing Co. in St. Louis. "Now it's nice and sunny outside, birds chirping and stuff, and I think on Saturday we did like $400."

Alpha Brewing is among the thousands of breweries nationwide to have landed an SBA loan in recent years, having secured a 21-year, $1.4 million note from First Bank of the Lake in 2017. It was one of the roughly 300 breweries nationally that year to tap the SBA's 7(a) and 504 loan programs for a total of around $150 million in growth capital. By 2019, the SBA programs' annual outlays to brewers had grown to 416 borrowers and $220 million in loan originations.

In the St. Louis region, at least 11 operating breweries have taken out a combined $16.95 million in SBA 7(a) loans since 2011. The majority of those loans have terms spanning 10 years or more, meaning a substantial portion of that money has yet to be paid back.

Given the financial hits local breweries have taken from stay-at-home orders, some could have trouble continuing to make their loan payments. But there's a silver lining: A provision of the recently passed CARES Act allows six months of loan forgiveness for new and existing SBA loans.

"The six months really helps," Langeneckert said. As for resuming loan payments after that time frame, Langeneckert said the brewery will just have to make sure the payments get made.

“I mean, it will be tough," he said. "The SBA, they extract personal guarantees from you for everything. So it's like, either you pay it or you lose your house."

Alpha Brewing, Urban Chestnut Brewing Co. and O’Fallon Brewery are the three St. Louis area breweries with SBA 7(a) loans of more than $1 million. Urban Chestnut has borrowed a total of $5.6 million, and O’Fallon Brewery has borrowed $5 million through its ownership LLC. O’Fallon Brewery president and CEO Jim Gorczyca and Urban Chestnut co-founder Florian Kuplent both said it’s hard not to be concerned about the future of their SBA loans when their businesses have been crippled by the coronavirus outbreak.

“We don’t know how long it’s going to last, so it’s kind of hard to plan for the future,” Kuplent said.

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