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Passion for Beer,7(a) Loan Brew Formula for Success

Picture of David Wolfe and Florian Kuplent, founders of Urban Chestnut Brewing Company

When most people start a new business, quite often their biggest problem is finding enough capital to fund their venture. But for Urban Chestnut Brewing Company founders Florian Kuplent and David Wolfe, finding money was not the problem.  The former Anheuser-Busch employees made excellent use of the Small Business Administration’s 7(a) Loan, the agency’s primary business loan program. It’s the most frequently used commercial loan program because of its flexibility.

 “We put some numbers together, came up with a business plan, convinced our wives and then left Anheuser-Busch in 2010,”says Florian who also serves as the brew master. “We brewed our first beer at our mid-town brewery in 2011.”

To get their business started they obtained their first 7(a) loan under the SBA Express program. This program allows lenders to obtain a guaranty on smaller loans up to $350,000. The SBA guarantees up to 50 percent of an SBA Express loan.

“We were looking at the 504 loan program and ended up going with the 7(a) loan because it made the most sense because of the amortization schedule for the life of the brewing equipment," says David.

In the first year of operation, Urban Chestnut produced 1,700 barrels of beer.  The brewery’s popularity grew so quickly that in 2012, Florian and David obtained a second SBA 7(a) loan to purchase the necessary equipment to increase production. The brewery continued to grow at an unexpected pace and by 2013, Urban Chestnut was producing so many barrels of beer they needed more space to expand.  That led to a third SBA 7 (a) loan which enabled Florian and David to open a second location with 75,000 square feet of space just three years after opening their doors for business.  In 2014, their year-end tally for barrels of beer produced rose to 11,000.

“The capacity at the mid-town location was 7,000-8,000 barrels depending on which beers we brewed.  We would not have been able to sell what we sold last year without this new facility.  It allowed us to grow the way we did,” says Florian.

As if opening a second location in three years wasn’t ambitious enough, Urban Chestnut, expanded yet again, this time into the overseas market with the purchase of a brewery in Germany.   “That purchase was more of a long term strategic decision to get into that market early and to start to grow it and start shipping beer to Germany to be distributed all over Europe,” says David.

David says at some point in the future the beer will be produced in Germany.  “We’re going to put a goal out there this year of 1,000 barrels from our new brewery in Germany and push it out to maybe 3,000 barrels within a year,” he says.

Between increasing the amount of barrels of beer produced and the expansion to three facilities, Urban Chestnut hit the break- even point within the first two years.  “From year one until now our revenue increased almost 800 percent,” says Florian.

But despite the rapid growth and the revenue increases, it hasn’t been all smooth sailing for the new entrepreneurs.  Fast growth comes with a price tag all its own.  “In the beer business, as is true for many businesses, rapid growth requires the rapid expansion of personnel.  It presents many challenges, some of which are financial and some of which are cultural,” says Florian.

David adds, “One of the biggest challenges for us has been ensuring we’re training everyone properly and that each individual understands our operating principles and most importantly our culture.  This is a difficult achievement when you add a bunch of people at one time and have to train them all at once instead of gradually integrating new people into the organization.”

On opening day Urban Chestnut employed five people. Today they have 95 employees, 30 of whom are full time.  And while they find it challenging to find the right people at the right time, Florian and David offer attractive perks to ease recruitment. Even before the Affordable Care Act became law, a good healthcare plan was part of Urban Chestnut’s compensation package.  And while they offer salaries that are competitive with others in the industry, the founders rely on the fact that there’s room for new employees to grow within the company.

“We have some employees that started out as bartenders and several of them have fairly senior positions in the company now after just five years, so there’s a lot of room for growth and development with us,” says Florian.

So while they’ve enjoyed the speedy growth of their business, Florian and David have their eye on the long term.  “It’s nice to have rapid growth in the short term but the idea is to keep the organization around for a long time so we’re bringing those expenses in now to build for the future.”  Now that’s the entrepreneurial spirit!