Loans for Retail Business

2015-02-21

Minyang Jiang

Updated August 8, 2022

You have a niche market and a product selection your audience raves about. You’re doing great on a small scale, but you have big plans for your indie retail business. There’s only one problem – capital. You have the foundation in place to support your small business growth, but you don’t have the cash flow to expand your inventory, business operations and storefront.
Small business loans offer a funding source you can use to take your business to the next level, but you have some important considerations to keep in mind before pursuing one.

Retail Business Loan Qualification

The first hurdle in the small business loan process is qualifying for the loan. Banks and other lenders have their own qualification criteria, and may look at your personal credit when considering whether you qualify for a business loan.

While personal loans primarily look at your credit score for qualification, business loan lenders look at other factors, such as your invested equity, access to other funding sources, current and future projected cash flow, business stability and proposed fund use.
If you haven’t already, creating a thorough business plan covers many questions a lender is likely to ask. Online lending platforms typically have less stringent requirements and consider the broader health of small businesses — these may be better options than traditional retail business loans.

Retail Business Loan Limits

Small business loan limits vary depending on the lender, but are significantly higher than most personal lines of credit. For example, the Small Business Administration loan limits exceed $1 million.. Have a financial plan in place on how to use the funds before the money comes in, so you put it towards the most beneficial areas for your indie retail business.

Retail Business Loan Interest Rates

It’s common sense, but don’t borrow more than you need, especially if you have a startup retail business. You don’t know exactly what your cash flow is going to be, whether you’re heavily affected by seasonal demand or one of the many other factors affecting how much your business brings in. The interest rate on the loan adds up fast with larger loans, so keep your small business funding in line with your projected needs.

Loan Options for Your Retail

Loans for retail apparel shops will allow you to establish an extensive and diverse stock, providing consumers with a wide selection to suit their personal tastes. There are several loan options at your disposal, so you can access a steady supply of currency to meet all of your financial needs.

Bank Loans

Commercial bank loans are the most common method of obtaining business funding. Banks often issue much larger loan amounts than other financing options, allowing you to rely on a single loan to cover the majority of startup and operational expenses. They are long-term loans, with payment plans up to 10 years in duration, which is one of the reasons they are so desirable to aspiring entrepreneurs. They also possess the lowest interest rates of all funding options, enabling business owners to access the money they need, while maintaining lower operational costs.
However, bank loans are difficult to qualify for, often requiring a history of great business credit, a sound business plan and a detailed chart of the store’s projected revenue. Provided you’ve been in business for a while, it’s likely you’ve already established the business credit needed to qualify. However, for first-time business owners or new startup companies, eligibility is often unattainable.

Government-Backed Loans

In the event you’re denied a commercial bank loan, government-backed loans are a practical alternative. The US Small Business Administration (SBA) is the largest supplier of government-backed loans. Since the government is partially guaranteeing the loan, the SBA is willing to take much bigger risks on business owners and will provide loans to new companies, even if they’ve yet to establish credit. Due to this increased risk, however, these loans are equipped with elevated interest rates. Though, with their long-term payment plans, they are easy to pay back over time.

Venture Capital

Venture capital is a form of equity financing in which investors by stocks or shares in a company so they can profit off of the success of the business. Venture capital investors are most interested in financing promising startups. Though credit isn’t that important when finding an investor, it’s imperative to have a sound business plan and an accurate description of projected revenues in order to pique the interest of investors. They seek high-growth companies that show excellent potential for returns and offer a unique business model that’s both lucrative and modernized.

Online Business Loans

Online small business loans provide retail storeowners the opportunity to seek out small sums of money to cover routine business expenses. These loans are typically issued for smaller amounts and are short-term loans, meaning you need to be prepared to pay it back right away. They are easy to qualify for, and applications are often approved within 48 hours. However, they often entail higher interest rates than other loan options, which can increase your overhead costs considerably. Nonetheless, they provide a valuable monetary solution when you require money right away.

Pre-Selling Products

Another great way to fund a retail franchise is by pre-selling. products. Pre-selling enables entrepreneurs to sell the idea of their product prior to launching the store. The money earned from the pre-sales is then used to finance the business, and you begin shipping the pre-orders once the company has successfully opened its doors. This not only helps to fund your venture, but it also allows you to market your products in advance, so you can establish a wide clientele of eager consumers before you open the store.

Getting Started With Business Loans For Your Retail Business

Finding loans for retail apparel shops can be easily done provided you know where to look. The financing options you choose will depend on your specific business model, your credit history, your projected revenue and the sum of money you require. For those with poor or nonexistent business credit, private equity investors and government-backed investors provide realistic alternatives. For all your working capital needs, contact Credibly.