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Intro To Liquor Store Business Loans
For most liquor stores, the key to success is focusing on high-profit items. This would be a lot easier if the demand weren’t so difficult to predict. And the only way to figure out what customers like is by purchasing many different items and seeing how they perform. Having so much money tied up in inventory can restrict your ability to capitalize on bulk discounts and stock up for the holidays. When you factor in periodic expenses like updating your security system and renewing your various licenses, your cash flow could be in serious trouble. United Capital Source has access to business loans for liquor stores so they can take advantage of lucrative opportunities amid these unavoidable financial dilemmas.
In this guide, we’ll answer the following questions and more:
What Are Liquor Store Business Loans?
Liquor Store Business Loans are business loans geared towards the cash flow cycles and recurring expenses of liquor stores. Besides covering short-term needs and larger purchases, these business loans can help you pay for local advertising and stay current with vendors or manufacturers.
Liquor Store Business Loans can take the form of:
- SBA Loans
- Business Line of Credit
- Working Capital Loans
- Merchant Cash Advance
- Revenue-Based Business Loan
- Accounts Receivable Factoring
How Do Liquor Store Business Loans Work?
Each of the products listed above can suit a different type of expense or cash flow issue. For example, liquor stores experience a massive surge in demand during the holidays. However, discounts for bulk orders are usually available in the off-season, when sales are down. Liquor Store Business Loans can allow you to purchase large quantities of popular items during slower periods, especially those with high profit margins.
Since liquor stores tend to conduct high volumes of debit and credit card sales, a Merchant Cash Advance can be a sensible option for ordering bulk inventory. Your borrowing amount is directly based on monthly debit and credit card sales volume. When sales are slow, your payments are smaller. A Merchant Cash Advance is cheaper when payments are more spread out. Thus, you’d save money when sales drop again after the holidays.
Since demand is difficult to predict, you might find that an item is performing unexpectedly well. This is the ideal scenario for a Business Line of Credit, designed for moderately sized, short-term expenses. Your interest rate would be very low because it wouldn’t take long to generate the revenue to pay off your full balance. A Business Line of Credit can ultimately help you practice “last minute” inventory management, which means placing orders when you have a solid handle on demand. As long as you continuously pay back what you borrow, your credit line replenishes and can be used repeatedly.
Liquor Store Business Loan Options Compared
|LOAN TYPES||MAX AMOUNTS||RATES||SPEED|
|Merchant Cash Advance||$7.5k – $1m||Starting at 1.09||1-2 business days|
|SBA Loan||$50k-$10m||Starting at 5%||3-5 weeks|
|Business Term Loan||$10k to $5m||Starting at 5%||1-3 business days|
|Business Line of Credit||$10k to $250k||Starting at 8%||1-3 business days|
|Receivables/Invoice Factoring||$50k-$10m||Starting at 5.8%||1-2 weeks|
|Revenue Based Business Loans||$10K – $5m||Starting at 9%||1-3 business days|
What Are The Advantages of Business Loans For Liquor Stores?
Liquor Store Business Loans can solve an array of inventory-related challenges. To maximize profitability, liquor stores are often recommended to strive for a high inventory turnover ratio. This is only possible if you have the means to order the right amounts of the right items on a cyclical basis. But many stores might not have enough cash on-hand to order specific items at these intervals.
Liquor Store Business Loans allow you to maintain your inventory management system despite fluctuations in revenue and sudden expenses. In other words, your ordering capabilities wouldn’t be hampered by the need to update your security system, fix your refrigeration unit, or renew your licenses. The same concept applies to incorrect inventory forecasting. You can still capitalize on discounts for bulk orders or high-profit items, even though most of your working capital is sitting on your shelves.
Liquor Store Business Loans can also help you stay current on vendor payments, making you eligible for discounts or longer payment terms.
What Are The Disadvantages of Business Loans For Liquor Stores?
Taking on debt is always risky in highly competitive industries with unpredictable demand. You might order a new item only to discover that customers would instead purchase it from the grocery store in your shopping center. And it’s important to remember that ordering bulk inventory can do more harm than good if it sits on your shelves for too long. You can still struggle to pay your bills even after selling large quantities of low-profit items.
Significant expenses also tend to create other expenses naturally. For this reason, many businesses unknowingly end up borrowing too little. Let’s say you’ve just used a business loan to purchase additional inventory for the holidays. But this new inventory won’t do you any good if you don’t market it correctly with local advertising.
Lastly, Liquor Store Business Loans can be particularly risky for younger businesses. It can take several years for new liquor stores to understand the preferences of their average customer truly. Thus, it might not be wise to double-down on certain items when you haven’t quite figure out your niche just yet.
Who Qualifies For Liquor Store Business Loans?
Approved businesses generally met the following criteria:
How To Apply For Liquor Store Business Loans:
The amount of paperwork required for the application depends on your chosen product. For most products, funds can be approved and distributed in up to three business days. Here’s how to apply:
Step 1: Choose the Right Product
The first step is choosing the most sensible solution to the problem at hand. This should require a decent amount of research, as each product is designed for different types of expenses and cash flow cycles. Are you looking to cover a short-term or long-term cost? Is demand expected to increase or decrease in the coming months?
Considering the funds’ purpose will also help us determine the correct borrowing and terms for your needs.
Step 2: Gather Your Documents
Here are the documents and information required for Retail Store Business Loans:
- Driver’s license
- Voided business check
- Bank statements from the past three months
- Credit card processing statements from the past three months (for Merchant Cash Advance)
- Accounts Receivable Aging Report (for Accounts Receivable Factoring)
- Accounts Receivable (for Accounts Receivable Factoring)
- Debt Schedule (for Accounts Receivable Factoring)
SBA Loans require additional documents and information. To learn what’s needed for the SBA Loan application, visit our SBA Loan page.
Step 3: Fill Out Application
You can begin the application process by calling us or filling out our one-page online application. Either way, you’ll be asked to enter the information from the previous section along with your desired funding amount.
Step 4: Speak to a Representative
Once you apply, a representative will reach out to you to explain the repayment structure, rates, and terms of your available options. This way, you won’t have to worry about any surprises or hidden fees during repayment.
Step 5: Receive Approval
If and when you’re approved, funds for Business Term Loans, Business Lines of Credit, Working Capital Loans, Equipment Financing, Merchant Cash Advance, Revenue-Based Business Loans, and Accounts Receivable Factoring should then appear in your bank account in anywhere from 24 hours to one week. For SBA Loans, it usually takes 3-5 weeks to receive funding.
Your Liquor Store Financing Gets Set Up – Now What?
Your business loan isn’t just a way to get financing for your business. It’s also an excellent opportunity to start building (or improving) your credit.
Regardless of the type of business loan you get, make all of your required payments on time and in full. If you get a business credit line or another form of revolving credit, keep your balance below the credit limit.
Consistently making your business financing payments on time and in full will positively impact your credit. And that means preferred rates and terms when you next need business financing.
What If I’m Declined For a Liquor Store Business Loan?
If we decline your application, it might be because you applied for the wrong product for your cash flow. In this case, we would likely recommend a different product with a less hazardous repayment structure.
We might also decline your application after determining that you cannot afford to take on more debt at this time. Instead, your needs and financial circumstances might be better suited for another financing tool, like a business credit card or even a personal loan. Both options can be accessed through UCS and are usually much easier to qualify for than business loans.
If your credit score is preventing you from accessing financing, you should consider our credit repair services. We can help you identify the issues that keep your score down and develop practical solutions for eliminating them.
People Also Ask:
Can Liquor Stores Qualify for SBA Loans?
Between 2006 and 2015, liquor stores took out more than $2.3 billion in SBA 7(a) loans. The SBA has traditionally favored liquor stores because they are among the few “recession-proof” industries. However, SBA Loans carry very steep requirements. Borrowers must have excellent credit, at least two years in business, and at least $360,000 in annual revenue. Significant paperwork is also involved, such as business tax returns, personal tax returns, personal financial statements, etc. And unlike other products, your intended purpose of the funds can impact your application.
What Expenses Can I Cover With Liquor Store Business Loans?
Liquor Store Business Loans can be used for a myriad of purposes, including:
- Purchasing inventory
- Covering operational expenses like payroll
- Upgrading technology
- Repairing equipment
- Renovating your physical space (interior or exterior)
- Moving to or adding another location
- Periodic expenses like renewing your liquor license
- Paying off other existing debts
Can I Use a Business Loan To Buy a Liquor Store?
Yes, you can use a business loan to purchase an existing business. However, this is only possible if you’re currently running another business with strong cash flow and profitability. You’ll also need excellent credit and (most likely) collateral. Business loan providers rarely approve loans for buying existing businesses if you’ve never owned one before.
Can I Get a Liquor Store Business Loan With Bad Credit?
Yes, five of the six products mentioned above are accessible for borrowers with bad credit. Your rates may be higher, and your terms may be shorter because bad credit makes you more likely to default. However, if you have strong cash flow or can provide collateral, your bad credit may have less impact on your rates and terms. We can also customize your terms and payment frequency to ensure that you can make payments while staying current on other bills.
For some products, your credit score is irrelevant. Approval for a Merchant Cash Advance is based on your debit and credit card sales volume. With Accounts Receivable Factoring, approval depends on your customer’s creditworthiness, not your own.
The only product that is not accessible with bad credit is SBA Loans. Compared to the other products, SBA Loans carry higher borrowing limits, lower rates, and longer terms. If you have bad credit, you’ll be assigned shorter terms to ensure you repay the loan in full.