For many industries, the appropriate time to take out small business loans isn’t exactly clear. You are constantly faced with unforeseen expenses, lucrative opportunities, and changes in demand. One example is liquor stores, which are stereotyped as risky business ventures due to the aforementioned variables. Much like restaurants, the failure rate of liquor stores suggests that small business loans won’t be much help and will likely do more harm than good. Why should I bother with debt financing, a liquor store owner might say. If my problems could be solved by a small business loan, wouldn’t these failures still be in business?
The answer is that when your predecessors were struggling to stay afloat, small business loans for liquor stores were very different from the way they are today. Modern business funding programs are much more accessible and can accommodate operational needs amid chaotic cash flow.
1. How Important Is Your Inventory Management System?
Inventory management is the key to running a successful liquor store. Owners must maintain a cyclical system that enables them to buy the right amount of the right products at the right times all throughout the year. The goal is to create a high probability of high-profit items making up most of your sales. Deviating from this system presents a host of consequences. You could end up with a vast supply of low profit items, which will barely keep your lights on even if you sell every single one of them. This could inhibit inventory turnover and cause you to sell and replace your entire inventory outside of the recommended time frame. These are the kind of mistakes that spelled demise in the past.
But thanks to companies like United Capital Source, any threat to your inventory system can be quickly vanquished. You might have to install a new security system, fix a broken refrigeration unit, or upgrade your outdoor sign. Since the general purpose of your small business loan is to stay current one expenses, you can be sure that your repayment terms would in no way make it harder for you to keep paying your vendors shortly after the problem is solved.
2. Can You Truly Be 100% Accurate With Demand?
A big reason alternative business financing companies tend to offer flexible terms is because their clients frequently deal with fickle demand. It’s difficult to predict which items will perform best during the summer or holidays. There’s sometimes no way to tell whether or not a new, high-profit item will sell just as well as similar but less expensive items. At United Capital Source, we understand that liquor stores must take chances to make money, and the outcome isn’t always what you hoped for. Stores with too much inventory might dramatically lower prices to sell the remaining items at a loss. On the other hand, you could just as easily discover that an item is selling much better than expected. You can only imagine how many beer distributors were caught off guard by the sudden popularity of local, craft brews or the liquor stores that are currently stocking up on prosecco instead of previous staples.
Working capital loans, credit card processing loans, and business lines of credit are just a few of the business funding programs that could help with either scenario. We can supply the funds to cover monthly expenses following a mishap in forecasting, or the extra costs of new items. You might be approached by a distributor offering a discount for bulk orders or a reasonable price for a high-margin item that will soon become much more expensive. The business funding program that is recommended for you usually depends on your present financial health, the size of the investment, and when the items are expected to be sold.
3. Merchant Cash Advance vs Business Line Of Credit
Borrowers who aren’t 100% sure how their latest orders will perform might be best-suited for a merchant cash advance. This type of working capital loan is paid back via a fixed but small percentage of credit and debit transactions, with no real due date. So, in the event that certain items don’t perform as well as expected, taking a little longer to repay the debt in full does not affect the amount you owe. Merchant cash advances are also ideal for stocking up before the holidays, since new items typically become available when business is slow.
Another viable option is a business line of credit, which is ideal for businesses that are increasingly prone to changes in demand or excessively chaotic busy seasons. You could a business line of credit to keep paying vendors on time amid a financial emergency, or to quickly capitalize on new trends. Both options can be used to cover expenses during a slow period. With a merchant cash advance, you should have a plan for increasing revenue shortly after. With a business line of credit, this period should be more of a temporary gap, as opposed to several months. If you are interested in either program, it is recommended to apply during your peak season in order to become eligible for larger borrowing amounts. Virtually all liquor stores will need more cash than they have on hand at some point. So it only makes sense to be prepared.
What If I Run Into The Same Situation Again?
You’re probably wondering what you’ll do when you find yourself in the same situation in the not-so-distant future. Well, as long as you repay the balance without trouble, you will most likely be able to access the same amount almost immediately after. Merchant cash advances and business lines of credit can be revolving programs, allowing you to arrange increasingly advantageous payment terms with vendors and gradually expand your business piece-by-piece. When you work with a company like United Capital Source, you don’t have to worry about “wasting” your first small business loan on something that isn’t an absolute game-changer.