September 2015 Issue of Wines & Vines

Bankers Optimistic and Ready to Loan

Experts advise clients to lock in today's rates for as long as possible

by Ben Narasin

When Wines & Vines started an annual review of wine industry finance four years ago, the universal response was caution, conservatism and a general feeling that clouds still hovered on the financial horizon as we fought our way out of the Great Recession. Today, our expert panel of bankers seems to see only sunny skies—and some predict even brighter times ahead.

The story this year is strength begets strength, and optimism abounds, with the one blemish of a general belief that interest rates must start to increase at some point in the foreseeable future.


    This is our fourth annual Wine Industry Finance Issue, and as you will quickly grasp when you start reading, it is the most optimistic assessment yet. Ben Narasin wrote this summary analysis and interviewed six influential lenders for the Q&A article, "What Finance Insiders Think."

    Korinne Skinner covers the role that Small Business Administration loans can play in winery finance, from her perspective at a non-profit agency specializing in this field, in her article, "How Wineries Use SBA Loans."

Panelist Mark Brody of Umpqua Bank summed up the dichotomy between then and now quite eloquently: “The wine industry is highly cyclical—a function of economic health, agricultural conditions, evolving consumer tastes, social trends and many other factors. Ultimately, the evolution and cyclicality very much play into finance trends, which tend to lag. Sustained periods of industry health attract new entrants and greater aggressiveness among the existing players. Periods of stress tend to cause the opposite effect.”

As the wine industry has improved—and improved many individual wine businesses along with it—existing lenders have increased their appetites to loan. This has increased the supply of capital to the industry in the form of more and larger loans, an increased number of businesses that lenders consider creditworthy and increased number of banks and players willing to lend into the industry. Of course the entrenched players with deep wine experience point to the fair-weather nature of many new arrivals—or long-absent returnees—and caution that borrowers should understand the partner they will be playing with long term, and whether that lender will remain long term when the cycle goes against it.

New players and aggressive competition for the best clients continue to encourage attractive and competitive credit terms and rates in any already record-low interest-rate environment. Terms and covenants also appear to be loosening. There has not been a better time in our recent experience than now for borrowers to shop around, improve the loans they have, add new ones and lock in long-term dating on debt at prices no one seems to believe can be sustainable at current levels.

Ben Narasin is a venture capitalist and freelance wine journalist. His work has appeared in the San Francisco Chronicle, Wine Enthusiast and other media outlets.

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