Running a retail business means facing a unique set of challenges when it comes to financing. When you need money to continue operating and working toward your goals for growth, a business loan can provide the necessary capital.
Covering Retail Expenses
In the retail sector, business owners must balance fixed expenses with those that fluctuate, including:
- Rent and utilities
- Regular and seasonal advertising
- Building and equipment maintenance
You may seek a loan when machinery breaks down or the time comes to expand beyond your current location. If you encounter a situation like this, you may find it easier to work with an alternative online lender than to go the route of traditional financing.
Understanding Loan Types
As a retail business owner, you can obtain a loan through a bank or credit union, the Small Business Association (SBA) or an alternative lender. Before approaching your chosen institution, you should know which type of loan is required to meet your needs.
- A working-capital loan may help to cover the costs of daily operations.
- Perhaps more convenient than a working-capital loan, lines of credit serve a similar purpose and can be extended as needed.
- The Small Business Administration guarantees “microloans” for other basics such as maintaining your inventory.
- For large purchases, however, a traditional long-term loan is usually best.
Every type of loan has its own terms and interest rates set by the lender. Whether you’re buying or building commercial property, you’ll want to focus on retail loans, real estate loans or construction financing. On the other hand, equipment financing is ideal for purchasing new equipment and maintaining existing machinery.
Qualifying for a Retail Business Loan
To obtain any kind of business loan, you need a good credit score for yourself and your company. This is what lenders use to gauge the risk of lending to you, and it’s a big part of whether or not they decide to grant you a loan.
All financial details for the business must be in order, including a business plan with detailed information about your products and services, clear profit and loss statements, revenue projections, what you intend to do with the loan, and how the loan will benefit your business.
You must be able to present a precise estimation of the costs to be covered by the loan. Some lenders may also want to see your marketing plan to get an idea of what types of promotions you’re using and how they’re increasing revenue.
Many small businesses have difficulty obtaining loans because of one or more problems:
- Poor personal or business credit
- Low cash flow
- Improper planning or a lack of organization
- Unrealistic projections
Any of these may cause a lending institution to deny a request for a business loan. Fortunately, there are alternative options such as online lending services that may be able to offer financial support if your business is turned down by a traditional lender.
Obtaining a business loan can help you pay off old debts, expand your existing enterprise or make it through tough times. With a clear understanding of loan types and requirements, you can approach lenders with confidence and walk away with the money that you need.