Private credit fills funding gap for US wineries and distilleries as banks tighten lending

Wineries and distilleries across the United States are increasingly turning to private credit for financing as traditional banks tighten lending standards. This shift comes at a time when the alcohol industry faces new challenges, including tariffs on imports and a decline in consumer drinking habits. As a result, private lenders are stepping in with loans secured by barrels of aging spirits and vineyard land, offering an alternative to conventional bank loans.

In recent months, several beverage distributors have received loans through a direct lending partnership between Wells Fargo & Co. and Centerbridge Partners. Notable recipients include Hand Family Cos. and Southern Crown Partners. Earlier this year, Cooper’s Hawk Winery & Restaurants, which operates both a wine club and a restaurant chain, sought private credit to refinance its debt. The company’s business model, which relies on monthly memberships and in-person wine pickups, has attracted interest from private lenders who value customer retention.

Matthew Harvey, head of direct lending at PGIM Private Capital, explained that deals in this sector range from large-scale wineries with mass-market appeal to boutique labels focused on exclusivity. Financing structures vary as well, with some deals taking the form of traditional corporate loans and others using assets such as barrels of whiskey or vineyard land as collateral. These asset-backed loans are particularly attractive when the underlying assets—like aging bourbon barrels—increase in value over time.

In March, InvestBev Group’s credit arm provided up to $50 million in financing to Lofted Custom Spirits, a contract distiller, using its inventory of aging barrels as security. Private lenders are also able to work with businesses that regulated banks may avoid, such as cannabis farms or casinos. However, these lenders must still consider the preferences of their investors, who may be wary of certain industries.

The alcohol industry’s current environment presents heightened risks for lenders. With fewer people drinking and tariffs threatening imports, sales have dipped for many producers and distributors. Some companies have even filed for bankruptcy or entered receivership in recent months. For example, Uncle Nearest, a Tennessee whiskey brand, defaulted on $108 million in loans and was placed into receivership. Kentucky-based Luca Mariano Distillery and Stoli Group U.S.A., owner of Kentucky Owl bourbon, have also filed for bankruptcy.

Despite these challenges, some private lenders see opportunity in the sector’s complexity. Brian Rosen, founder of InvestBev Group, said his firm can achieve returns as high as 30% on private credit deals involving alcohol businesses due to the specialized knowledge required. He noted that banks often view the sector as too risky given current market conditions but that his firm is willing to step in where others will not.

Traditional banks have not exited the sector entirely but are more cautious than before. For example, Wells Fargo continues to provide revolving credit facilities alongside its direct lending partnership with Centerbridge Partners. Still, with consumption down and tariffs squeezing margins further, many companies are seeking capital from private sources.

Publicly traded alcohol companies are also feeling the pressure. Molson Coors Beverage Co., which owns several major beer brands, recently lowered its full-year financial guidance for the second consecutive quarter due to weak consumer demand and declining U.S. market share.

Industry experts say that while alcohol sales have historically remained resilient during economic downturns—such as during the COVID-19 pandemic or the 2008 recession—the current combination of factors is creating an inflection point for producers and distributors.

When bankruptcies occur in this sector, lenders face unique challenges compared to other industries. Taking over a winery or distillery often requires specialized expertise and appropriate licenses. Kevin Griffin, CEO of MGG Investment Group—which acquired Spring Mountain Vineyard in Napa Valley out of bankruptcy last year—emphasized the importance of knowing how to liquidate assets or operate the business if necessary.

As traditional banks remain cautious and industry risks persist, private credit is likely to play an increasingly important role in financing American wineries and distilleries. The trend reflects both the challenges facing the sector and the willingness of specialized lenders to navigate its complexities for potentially higher returns.