Model Case: Rural Production Brewery and Taproom in Marion, McDowell County, North Carolina, USDA Business and Industry Guarantee

A model feasibility case built only from public data. The building, borrower and brand are hypothetical; no client file or engagement data is used. The case follows the house format: at a glance, determination, program eligibility, site and regulatory pathway, market analysis, full cost table, operating assumptions, ten-year pro forma, DSCR by year, break-even, sensitivities, collateral and conditions. Figures are as of October 9, 2026. Part of the restaurant feasibility study cluster; format detail on the brewery feasibility study page, program detail on the USDA feasibility study page, and the state frame on the North Carolina feasibility study page.

The project is not feasible as proposed. The borrower's plan is a production brewery: a 15 barrel brewhouse with six fermenters and a canning line, a 2,000 SF taproom, and a year-three forecast of 1,500 distributed barrels against 500 in the taproom. On the borrower's forecast the plan covers 1.28x. The study does not carry that forecast. Craft production fell 5 percent in 2025 and 4 percent in the first half of 2026, taproom volume fell 3.9 percent in 2025, distributed beer earned $602.02 a barrel in the Brewers Association's 2023 benchmarking against $1,276.14 for beer sold over the bar, and a new brand with no accounts in a state whose largest craft market, Asheville, is among the most crowded in the country has no record that supports 1,500 barrels of outside sales in its third year. The study carries 800. On that volume the plan earns $110,493 at stabilization, 9.9 percent of revenue, against $201,414 of debt service on the $1,934,092 guaranteed loan: 0.55x in year 3 and 0.07x in year 1. The plan is a packaging hall financed by a taproom that is too small to pay for it.

The project is feasible as restructured, subject to the conditions at the end of this page. The restructure reverses the plan: the taproom grows to 3,500 SF with a beer garden, the brewhouse keeps its 15 barrel size with four fermenters rather than six, the canning line is deferred to a mobile canner, and the year-three mix becomes 600 taproom barrels at $1,150 and 900 self-distributed barrels at $500, 1,500 barrels in all on a system that can brew about 1,800. Total cost is $2,563,097 including a $160,000 reserve, equity is 25 percent of project cost as 7 CFR 5001.105(d)(4) requires of a new business, and the $1,922,322 guaranteed loan costs $200,188 a year. The brewery earns $253,873 at stabilization, 19.5 percent of revenue, covers 1.27x in year 3 and 1.04x in year 2, and holds 1.15x down to revenue 3.2 percent below plan; year 1 is 0.59x, which the reserve carries. Part 5001 sets no regulatory DSCR floor for a new loan, so the 1.25x is the lender's covenant, and the case clears it by a narrow margin that the sensitivity table shows plainly: 100 fewer taproom barrels or 300 fewer distributed barrels takes the project below 1.0x. The determination rests on the taproom, and the conditions are written around the taproom.

SBA 7(a) and 504 were considered. A 504 would need 15 percent as a new business, or 20 percent if the CDC treats a brewery as special purpose, at a fixed debenture rate; the owner-occupied building qualifies. The B&I guarantee was preferred for the rural address, the 85 percent guarantee on a thin-collateral loan and the single long amortization; the choice should be revisited if the FY2027 notice changes the guarantee or fee.

Marion is the McDowell County seat in the North Carolina foothills, on I-40 and US 221 between Morganton and Asheville, with Lake James State Park, Linville Gorge and the Blue Ridge Parkway at Little Switzerland in its tourism orbit. The county had 45,269 residents in July 2024 and the city 7,534. Western North Carolina's tourism economy took the force of Hurricane Helene in September 2024, and the study for a fixed address would report the county's occupancy tax receipts and visitor counts for 2025 and 2026 against 2023 as the demand base, which is a condition. The model building is a 9,000 SF former industrial structure on 1.5 acres with municipal water and sewer, floor loads for tanks and a yard for the beer garden.

Federal and state permits run in parallel. The TTB Brewer's Notice took 43, 35 and 34 days at the median in June, July and August 2026 against an 85 percent-within-75-days goal, and the schedule carries 90 days. North Carolina's ABC Commission issues the commercial brewery permit and the on-premises malt beverage permit for the taproom; under N.C.G.S. 18B-1104(a)(8) a brewery selling fewer than 100,000 barrels a year may self-distribute up to 50,000 barrels to unaffiliated retailers and may operate up to three additional retail locations, which is why the distributed stream is modeled as self-distribution at $500 a barrel rather than through a wholesaler at the Brewers Association's $318 lower quartile. Excise is $3.50 a barrel federal on the first 60,000 barrels and $0.6171 a gallon, $19.13 a barrel, in North Carolina. Sales tax is 4.75 percent state plus the county rate and passes through. Property tax is modeled at $11,000 a year on the renovated building, pending the McDowell County and City of Marion rates on the appraised value.

Wastewater is the engineering item that a brewery adds to a restaurant file. Brewery effluent runs 5,000 to 20,000 mg/L BOD and 3,000 to 15,000 mg/L TSS, twenty to eighty times the 250 to 300 mg/L surcharge thresholds in the ordinances MMCG reviewed, and small-city utilities from Logan, Utah to the Rhode Island towns charge $0.06 to $0.76 a pound above threshold and may require pretreatment. The budget carries $40,000 of pH neutralization and solids capture and $12,000 a year of surcharge and operation; the City of Marion's pretreatment requirements and surcharge schedule are a condition.

The format's economics. The Brewers Association's 2023 benchmarking, the latest public release, puts direct-to-consumer beer at $1,276.14 a barrel (25th percentile $1,062.60, 75th $1,500.97) against distributed beer at $602.02 (25th $318.02, 75th $548.14, an average pulled above its 75th percentile by outliers), total revenue at $1,511.35 a barrel, taproom cost of goods at a skewed $373.60 with a 75th percentile of $317.44, state excise at $6.28 a barrel nationally, and non-beer beverages at about 6 percent of revenue. The gap of about $674 a barrel between the bar and the wholesaler is the case's central number: every barrel moved from distribution to the taproom roughly doubles its revenue and raises its margin, which is why the restructure sells more over the bar and brews less for the road. The model carries the taproom at $1,150 a barrel, between the 25th percentile and the average, and self-distribution at $500, below the 75th percentile, and tests both.

The trend. Craft production fell 5 percent in 2025 and 4 percent in the first half of 2026; taprooms were the best-performing model by volume change, with 57 percent reporting growth, while the taproom count fell 2 percent. The craft industry's economic impact stood at $71.8 billion and 415,000 jobs in 2025. Named 2025 and 2026 closures and their stated reasons frame the risk: Oakshire in Eugene (rising costs, competition, changes in how people gather), Whiner in Chicago (distribution "plummeted by the end of 2024" and taproom sales did not cover labor, space and equipment), Proximity in Durham ("high operating costs"), Southern Star in Texas, and Diageo's Guinness Open Gate in Maryland. None of them was rural, and the Whiner reason is the proposed plan's risk stated by a failed operator.

North Carolina. The state is a large and mature craft market with Asheville at its center, which cuts both ways for Marion: a deep visitor base that already drinks craft beer, and a wholesale market with no room for an unknown label. The study for a fixed address would count the breweries in McDowell and the adjoining counties, their taproom sizes and hours, the population per brewery inside a 30-minute drive, and the tourism generators' visitation, and it would price the taproom against the pints poured in Morganton and Asheville. For the model case these are conditions, and the state's self-distribution rule is the reason the distributed stream carries any margin at all. Rural demand data at the county level, taproom visitation and brewery-trail tourism figures do not exist in the public record; the model uses the Brewers Association's per-barrel figures and the volume cases below.

No manufacturer price list, SBDC brewery guide or capital survey with dated figures exists in the public record; the equipment lines rest on vendor and aggregator ranges and the executed quotes are a condition. The 20-year amortization blends real estate at 30 years, equipment at 15 and working capital at 7, inside the single 40-year cap of 7 CFR 5001.402. The reserve is deliberately large: a brewery's first two years are the years in which the taproom builds and the labor is already hired, and the USDA rule allows the first principal and interest payment within three years, which is the alternative structure a lender may prefer to a funded reserve.

The statement is built by stream, because the two streams earn different money per barrel.

Food is served by third-party food trucks under a schedule, with no kitchen in the budget, which is the low-capital default for a rural taproom. The ramp is 75 percent of stabilized volume in year 1, 92 percent in year 2 and stabilized from year 3, a model assumption on a format whose taproom opens at volume while distribution builds; the Brewers Association's capacity utilization figure is unverified. Prices and costs escalate 3 percent a year.

The proposed plan never covers on supportable volume; the restructured plan covers from year 2 and reaches the covenant in year 3. The year-one shortfall as restructured is $81,113, inside the $160,000 reserve with about four months of debt service to spare; year 2 covers 1.04x on its own.

On the stabilized year-3 statement with both streams scaled and the fixed lines held, the restructured brewery covers debt service at $1,140,994 of revenue in year-1 dollars (7.2 percent below plan), reaches 1.15x at $1,190,779 (3.2 percent below) and 1.25x at $1,223,969 (0.5 percent below). As proposed on supportable volume, break-even is $1,206,921 and 1.15x needs $1,257,402, 19 percent above the plan. The restructured cushion is thin, and the mix matters more than the total: the sensitivity table shows that losing 100 taproom barrels costs more coverage than losing 300 distributed barrels.

All rows start from the restructured base unless labeled otherwise.

Taproom volume is the binding variable, then the distributed volume, then labor. The per-barrel price risk on the taproom side is absorbable at the 25th percentile only because the base sits below the average; the distributed price is already carried below the 75th percentile. The slower ramp does not change year 3 but takes year 1 to 0.25x and the two-year shortfall to about $190,000, beyond the reserve, which is why the opening plan is a condition and why a lender may prefer the three-year first-payment deferral that Part 5001 allows to a reserve.

7 CFR 5001.203 requires as-is and prospective appraised values for a construction project and strips going-concern value before the lender discounts the collateral, and the program page says the discounted collateral must at least equal the loan. That test is tight here. The building is worth $450,000 as-is and perhaps $1,000,000 as renovated to a buyer who wants a brewery and far less to one who does not; the brewhouse, tanks and glycol system are special-purpose equipment that resells at heavy discounts; and the taproom fit-out is worth what the next tenant pays for it. Against a $1,922,322 loan, the lender's justified discounts will leave a shortfall that the 85 percent guarantee is designed to cover, and the study says so rather than assuming a value the appraisal will not produce. B&I portfolio stress is the background: more than $1 billion of a $12 billion portfolio was delinquent in early 2026 and USDA removed ten lenders holding about 47 percent of that delinquency on May 12, 2026, which argues for conservative collateral and a cash reserve rather than optimism on either.

Prepared by Michal Mohelsky, J.D., FMVA, Practicing Affiliate of the Appraisal Institute. Model case aligned with 7 CFR Part 5001 and Appendix A to Subpart D, under USPAP discipline. MMCG Invest, LLC, 27 Maiden Lane, Suite 625, San Francisco, CA 94108.