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Intro To Retail Store Business Loans
Retail stores are known for their rocky cash flow, which stems from a multitude of circumstances. It’s common for stores to order too much inventory and leave precious working capital sitting on their shelves. Since retail items tend to carry low profit margins, simply making more sales won’t necessarily balance out cash flow. And once you finally gain momentum, your success can suddenly be halted by an online competitor. United Capital Source has access to Retail Store Business Loans for stores looking to revolutionize the in-store experience, coordinate their inventory with demand, and ultimately prove that brick-and-mortar can compete with eCommerce.
In this guide, we’ll answer the following questions and more:
What Are Retail Store Business Loans?
Retail Store Business Loans are business loans geared towards the cash flow cycles and periodic expenses of retail stores. In addition to covering short-term needs and large-scale investments, these business loans can bridge temporary revenue gaps until demand picks back up.
Retail Store Business Loans can come in the form of:
- Business Term Loans
- SBA Loans
- Business Line of Credit
- Working Capital Loans
- Merchant Cash Advance
- Revenue-Based Business Loan
How Do Retail Store Business Loans Work?
Each of the six products listed above can suit a different cash flow-related dilemma. For example, many retail stores are highly seasonal. Depending on the items you sell, demand might fall or drop significantly during the winter or summer. But since the busy season comes right after the slow season, stores must use this period to prepare for the surge in demand. This might include stocking up on inventory, hiring more sales associates, or ramping up your advertising.
A Merchant Cash Advance is often an appropriate tool for these initiatives because retail stores tend to perform high debit and credit card sales volumes. The higher your monthly debit and credit card sales volume, the more you can borrow. And since payments are directly tied to sales, you’d make smaller payments during the slow season. Thus, you could make the investments mentioned above during the slow season to maximize the busy season’s performance. A Merchant Cash Advance is even cheaper when your payments are more spread out, so you’d save money by applying well before the busy season begins.
On the other hand, if you’re looking to cover short-term expenses, a Business Line of Credit might be more cost-effective. This is arguably the most sensible product for managing inventory since the goal is to order items shortly before you plan to sell them. A Business Line of Credit allows you to place orders in response to shifts in demand and pay your vendors up front. This often ensures that orders are received promptly and for discount prices as well. You’ll pay less interest since you’ll soon have the revenue to pay off your full balance.
Retail 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|
|Equipment Financing||Up to $5m per piece||Starting at 5%||3-10 business days|
|Revenue Based Business Loans||$10K – $5m||Starting at 9%||1-3 business days|
What Are The Advantages of Retail Store Business Loans?
Many retail stores might struggle to obtain financing from traditional business lenders because of their rocky cash flow. Conventional business lenders carry traditional products that require fixed, monthly payments. Companies like United Capital Source, however, offer various products with very different repayment structures. This allows us to regularly approve retailers that are prone to occasional dips in revenue or extreme seasonality. In other words, rocky cash flow won’t stop you from accessing most of the six products mentioned above.
Furthermore, Retail Store Business Loans can give you more control over your inventory, which directly impacts profitability. The longer you take to sell an item, the less profitable it becomes. Business loans provide the means to order by demand and capitalize on discounts on high margin items. Improving cash flow in retail means focusing on your most profitable items instead of selling more items in general.
Lastly, brick-and-mortar retailers must emphasize the in-store experience to compete with eCommerce. This might involve renovating your interior or buying new furniture. While UCS is not the only company that offers Business Term Loans and SBA Loans, we can approve these products much quicker than traditional business lenders. Our requirements are also not as strict, especially regarding credit score and the need for collateral. After all, the best time for making interior changes is your slow season, when you’re less likely to obtain approval from traditional business lenders. We can even customize your terms to match the exact time frame of your initiative.
What Are The Disadvantages of Retail Store Business Loans?
Since demand is so unpredictable in the retail industry, it can be challenging to choose the right business loan for your current needs. Choosing the wrong product can put pressure on cash flow and inhibit profitability even further.
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 busy season. But this new inventory won’t do you any good if you don’t have enough sales associates to sell it.
Lastly, the dominance of eCommerce makes the future seem increasingly intimidating. To clarify, retailers might not know precisely how far they’ll have to go to stay competitive. Should they ramp up their advertising? Should they start selling new products? It’s hard to tell which strategy will achieve the desired result and which ones will be a complete waste of money. Trying to implement multiple competitive strategies can cause retailers to borrow too much. Paying back this much debt isn’t easy when demand can rise or fall at any moment.
Who Qualifies For Retail Store Business Loans?
Approved businesses generally met the following criteria:
How To Apply For Retail 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 expense? 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
- Invoice for equipment (for Equipment Financing)
- Credit card processing statements from the past three months (for Merchant Cash Advance)
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 Business 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 Retail 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 your chief obstacle in accessing financing, you should consider these 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:
Do Retail Store Business Loans Require Collateral?
No, collateral is not required for Retail Store Business Loans. However, if you can provide collateral, you may be able to offset issues with credit or cash flow that would have otherwise resulted in higher rates or lower borrowing amounts. Before assuming you can provide collateral, contact the business loan provider to ensure your type of collateral is accepted. And the value of collateral might not directly reflect your permitted borrowing limit. For example, $10,000 worth of collateral might be able to get you a $6,000 loan with a competitive interest rate.
How Do You Qualify For Retail Store Business Loans?
This depends on where you apply and the product you have in mind. If you’re looking for a bank loan, you’ll need excellent credit, perfect cash flow, collateral, plenty of money in the bank, high annual revenue, and at least two years in business.
Products from companies like United Capital Source are much more accessible. Your ability to meet the requirements mentioned above will determine your borrowing amount, rates, and terms. But falling short in any (or more than one) of these areas won’t stop you from qualifying for multiple products. With some products, your credit score is practically irrelevant. For example, eligibility for a Merchant Cash Advance is based entirely on the size and volume of your debit and credit card sales.
Can I Get a Business Loan To Open a Retail Store?
Banks sometimes offer SBA 7(a) loans for new businesses. However, you’ll have to meet a series of requirements. For example, eligible borrowers must have reasonable equity to invest. Ideally, this means that you’re currently operating another profitable retail store. But this could also mean investing your own personal equity, like real estate.
Also, you must prove to the bank you have no other viable sources of financing. In other words, the bank will likely ask why you didn’t just use your savings account to fund the business or apply for a personal loan.
What Types of Retail Stores Can Get Business Loans?
Business loans are available for all sorts of retail stores, including (but not limited to):
- Convenience stores
- Fashion retailers
- Footwear retailers
- Toiletries and cosmetics stores
- Furniture stores
- Homewares retailers
- Appliance retailers
- Electronics retailers
- Sporting goods stores
- Gift shops
- Discount and variety stores
- Health stores
- Jewelry stores
- Toy stores
- Pet stores
Can I Get a Retail Store Business Loan With Bad Credit?
Yes, four out 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.
The only two products that are not accessible with bad credit are Business Term Loans and SBA Loans. These products carry high borrowing limits, low rates, and long terms. The other five products usually carry shorter terms and are much easier to repay. We can also customize your terms and payment frequency to ensure that you can make payments while staying current on other bills.