How ABL lenders can structure and monitor brewery facilities that hold up under stress

Brewery borrowing bases fail for predictable reasons. The issue is rarely the assets themselves. The real test is whether the borrower converts sales into cash at the rate the facility assumes. Strong structuring and close monitoring protect availability when conditions tighten.

Borrowing base weak points

Receivables
Dilution, concentration and dispute‑driven ageing are the key risks. Effective underwriting relies on analysing historic net performance by debtor and by reason code. Promotion‑heavy accounts need tighter eligibility. Field exams should focus on the timing and pattern of credit notes, not just the ageing report.

Inventory
Finished beer is perishable, so eligibility should follow best‑before dates. Seasonal or collaboration batches should be excluded unless pre‑sold. Bonded stock adds additional compliance and funding requirements. Leakage in kegs and casks makes accurate tracking essential.

Plant and machinery
Secondary values fall quickly when closures rise. Removal and recommissioning costs are often underestimated. Title is frequently split across leases, HP and vendor finance. Conservative valuations based on recent realisations are essential.

Property
Brewery sites are specialised and attract a limited buyer pool. Property should be a separate credit consideration rather than reassurance for a weak working capital position.

Early warning indicators

• Operational – Rising returns or credits, CO₂ or packaging disruption, keg and cask shrinkage, and any form of product recall.
• Commercial – Distributor delists, range reviews, and increasing exposure to stressed pub estates.
• Financial – Duty, VAT or PAYE arrears, and borrowing base utilisation rising while sales remain flat or fall.
• Cyber – Grocers rely heavily on EDI. If a cyber incident interrupts order processing or invoicing, the impact on liquidity is immediate.

Structuring that holds up under stress
• Regular borrowing base reporting with clear dilution trends and visibility of top debtors
• Inventory ageing by package type and SKU class
• Definitions that set out rebate and credit mechanics in precise terms
• Inventory finance where eligibility is tight, tested and auditable
• Equipment finance priced and covenanted for lower recoveries in closure cycles
• Property used for genuine downside protection rather than compensating for weak working capital

FRP’s perspective
FRP’s work across brewing and hospitality provides direct insight into how cash conversion fails and how value is protected. Our ABL teams at Hilton‑Baird also have hands‑on experience collecting debt from retail, wholesale and on‑trade debtors, which informs eligibility and reserving in practice.