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CO VER S T OR Y SPECIAL REPORT: Wine Industry Finance The Top 20 lenders and their roles in supporting vineyards and wineries By Ben Narasin drums ushered in with 2008. But since the start of 2012, Hinde says, "My phone has been ringing off the hook" with wineries looking for credit. B The battle between lenders "is as competitive for good credit as it has ever been," says Rob McMillan, founder of Silicon Valley Bank's Wine Division. Increasing competition for wine business has caused more aggressive bidding to win high-quality deals, which has tightened interest rate spreads, which in turn has created more interest in debt financing. y 2010 Jason Hinde, a vice president and senior relation- ship manager with Mechanics Bank, says that the wine in- dustry was starting to revive itself from the economic dol- In addition, a short supply of grapes has growers excited, and there's a strong sup- ply of people looking to buy vineyards and wineries. (Read more about vineyard and winery real estate starting on page 58.) Demand is so strong, in fact, that it's caus- ing a bottleneck in an unexpected place: appraisals. "There's so much activity in the real estate side that appraisers are all backed up," McMillan says. "Some say they may have to stop taking appraisals to close this year.…If you want your deal done this year, you'd better do it pretty quick." "It's kind of in full swing now," Hinde says. "I think people are starting to have a sigh of relief." Perspective from the past Highlights • This report identifies and details the services of the top 20 lenders specializing in West Coast wine industry lending and financing. • Demand is strong for grapes and wine, and financial institutions are slowly gain- ing an increased appetite for loans. • The wine industry finance report explains the common types of loans, types of lend- ers and what attributes vintners and grow- ers should look for in a finance company. 24 WINES & VINES SEPTEMBER 2012 Part of the reason for relief and increased appetite for lending is that sellers' and buyers' expectations have reached equi- librium. "After the crash, buyers thought it was 1929, and sellers thought it was 2006," McMillan says. "Now they've figured out it's 2012." Lenders also have become more sanguine about the wine trade as it has matured, and the financial players involved have stabilized. That was not always the case. "In the 30 years I've been in the industry, every single form of (non-bank) capital I'm aware of has come into the wine industry," says Vic Motto, CEO of Global Wine Part- ners, an investment bank dedicated to the wine industry. "Just about none of them have done well. Banks on balance have been pretty successful." To enter or succeed in the wine game, financial players need to have a grasp on the nuances of wine. "It's understanding varietals, terroir and who they're selling to," Hinde says. "It's very comparable to other products, but you have to know the subtle differences as well." Motto takes it a bit further: "The wine industry is inscrutable and hard to understand," he says. "It's different than any other industry I've been exposed to. It's capital intensive, has long operat- ing cycles, a limited pool of professional management, low operating margins and is subject to agricultural and economic cycles. It's highly fragmented, so it's very competitive, and no one has (dominant) market share. All that being said, it's one of the most successful industries in the United States." The success outshines the difficulties in the good times, and financial players come rushing in, often at the high point of the "Most (owners) put everything they have into the business, and then they borrow. They are operat- ing at the pleasure of the bank." —Vic Motto, Global Wine Partners WINE INDUS TR Y FINANCE