Small Business Advice

Navigating Liquor License Costs and Funding

Alcohol is big business, totalling almost $30 billion annually in Canada alone. But with big reward comes big responsibility; regulations around the sale of alcohol in Canada are strict, and can be complex and costly, so you need to ensure you are prepared. Here’s what you need to know regarding the financial aspects of liquor licensing:

Liquor License Costs

The regulation (and therefore cost) of liquor licenses differs across provinces and territories; it also depends on what type of license you need. This is where things can be either quite complicated, or simple, depending on your exact situation.

For example, in B.C. there are two main types of liquor license that cover bars and restaurants, known as either “Liquor Primary” or “Food Primary”. The cost to apply for these licenses is $2,200 and $950 respectively, with another payment of either $2,200 or $950 due to cover the license for the first year. Renewal fees then depend on the amount of alcohol sold per annum. This is one of the simpler set-ups. 

Compare this to Newfoundland and Labrador, where there are fourteen different types of liquor license, each with their own rules and regulations, and each with a different application process and varying terms and costs. So, depending on your exact business model, you may be looking at an initial cost of $50 to $200, plus an annual cost of anything from $100 to $2,400. 

Regardless of where your business is based, you should be prepared for:

  • License application fees
  • Initial license fees
  • Renewal fees
  • Transfer fees
  • Fees for additional permits and endorsements

The variability in liquor licensing costs means it is crucial you do your research before considering a new license, and that you stay on top of the regulations to make sure you’ll have the funds needed for license renewal in hand. The absolute worst thing to do is have a business reliant on revenue from alcohol sales, and be unable to cover the cost of your license renewal when it comes due.

ProvinceLiquor Licensing Regulatory Body
AlbertaAlberta Gaming & Liquor Commission (AGLC)
British ColumbiaBC Liquor & Cannabis Regulation Branch (BCLCRB)
ManitobaLiquor, Gaming and Cannabis Authority of Manitoba (LGCA)
New BrunswickNew Brunswick Justice and Public Safety
Newfoundland & LabradorNewfoundland Labrador Liquor Corporation
NWTNWT Liquor Licensing Board
Nova ScotiaNova Scotia Liquor Corporation (NSLC)
NunavutNunavut Liquor & Cannabis Board (NLCB)
OntarioAlcohol and Gaming Commission of Ontario (AGCO)
PEIPEI Liquor Control Commission (PEILCC)
QuebecQuebec Alcohol, Racing and Gaming Commission
SaskatchewanSaskatchewan Liquor and Gaming Authority (SLGA)
YukonYukon Liquor Board (YLB)

Financing Your Liquor License

As the cost of a liquor license can run into the thousands, there are many businesses – including a majority of independently-owned bars and restaurants – that struggle to afford the fees when they come due. But as losing your liquor license is not a viable option, what can you do in this situation? Fortunately there are many financing options to help business owners over this hurdle. Below we have outlined just the most relevant to this conundrum:

Merchant Cash Advance

A merchant cash advance (MCA) is a financing option that suits restaurants and bars particularly well, as the repayment mechanism mimics the amount of trade. Essentially, an MCA is a lump sum cash advance on anticipated future credit card sales, which is repaid as a percentage of these sales as they happen. So you are not stuck repaying a fixed sum at regular intervals, but instead see a small portion (e.g. 10%) of your incoming revenue deducted at the point-of-sale terminal. 

This makes an MCA a convenient and easily accessible way of sourcing immediate capital to cover the cost of liquor licensing, which can then be paid back over time by the revenue generated by that license.

To learn more about MCAs and how they stack up against other financing methods, read an in-depth analysis here.

Business Loan

A more structured solution is a business loan; these come in many shapes and sizes, and can be gotten from traditional lenders (like a bank or credit union) or an alternative lender (like an online-only lender or a peer-to-peer lender). The benefit of a business loan is that it can grant access to potentially large sums of money, for use on any legitimate business purpose. Interest rates can be low, and repayment happens over a set term via equal monthly repayments. 

A business loan can be useful if you need funds for both your liquor license and other business costs, but may be unachievable if you only need a small amount (e.g. just to cover the cost of a license renewal). This is because most business loan lenders focus on amounts starting at $5,000+. However, if you need a larger amount, a business loan may be the cheapest way to go.

Business Line of Credit

Lastly, a business line of credit can be an extremely useful tool for bars and restaurants with changing or unknown financial needs. A line of credit is a type of loan that allows you to borrow any amount of money, up to a pre-set limit. Only what you actually borrow is subject to interest charges, and once you have repaid outstanding balances, you can then re-use the line. So if you keep the line open over time, you can use it for licensing costs each year, as well as other ad hoc business needs. This flexibility is very convenient, but note that interest rates are usually higher than with a standard loan, and your credit limit will depend on your business.

Don’t Miss Out

Canadian households spend an average of $1,125 on alcohol each year – 28% of which is spent in bars and restaurants. But, whilst undoubtedly a sound financial investment, a liquor license is not always cheap or easy to obtain. Make sure you prepare your financing in advance to prevent your business from being caught out by licensing costs. And to find out more about your financing options, speak to one of our experts.