Retail Business Loans

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Retail Business Loans

Retail Business Funding

By far the majority of businesses in the U.S. are retail businesses. Whether you are trying to sell diamond rings or doughnuts, selling online or in a brick-and-mortar store the problems you face are very similar. The retail market is a dynamic place to do business in, constantly changing and evolving. While the fixed costs of running a retail company might be stable, making sure you have the right inventory to meet demand with all the problems of trends and seasonality can create financial problems.

The situation has become more acute with the growth of online sales and social media. Items come in and out of fashion overnight and second-guessing is almost impossible. For most retailers, careful use of outside finance is the only way you can stay at the top of your game and not stumble with cash flow.

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What is a retail business loan?

There are many finance packages available for retail businesses. They range from the big-ticket long-term business loan, through inventory financing and equipment loans, to business credit cards. Which one(s) you use depends on whether you are looking to stock up with this week’s hot item, simply ease a difficult cash flow situation, or buy real estate and build a retail outlet.

How does a retail business loan work?

For normal term loans, either long or short, the lender agrees to lend the borrower a sum of money at a certain percentage over a fixed term. That term may vary from as little as a few weeks to 25 years but the principle is the same. These sorts of loans often need high credit scores and a good trading history to qualify.

Inventory and equipment financing is usually easier to come by as what you are buying provides insurance for the lender.

Business lines of credit and business credit cards are similar to each other. Broadly, the lender gives you a maximum amount you can borrow which is paid back regularly and as the money is paid back so it becomes available to borrow once again.

Compare retail business loan options

Kabbage Business Loan Review


Funding: Borrow $1,500 - $150,000
Minimum Credit Score: 640
Loan term: 6, 12 or 18 months
Funding turnaround: As soon as 1-3 business days

Kabbage offers borrowers a credit line up to $150,000 with monthly repayment options and no prepayment penalties. Approval as fast as same business day.

SBA 7a

SBA 7(a) loan

Funding: Borrow up to $5,000,000
Minimum Credit Score: 650
Best For: SBA loans
Funding turnaround: Varies.

The SBA 7(a) program features lenders such as Wells Fargo in their network and provides capped interest rates and long repayment term flexibility. Term loans and lines of credit access available. Typically, collateral will be required with a personal guarantee. Funding times vary and may be longer than most other lenders.

FundBox Business Loans


Funding: Borrow $2,500 - $150,000
Minimum Credit Score: 600
Loan term: 12-24 months
Funding turnaround: as fast as next business day

Fundbox requires minimal documentation and access to a revolving line of credit without origination or maintenance fees. Borrowers are not required to have collateral (with exception of larger credit lines which are subject to a personal guarantee).

Funding Circle

Funding Circle

Funding: Borrow $25,000 to $200,000
Minimum Credit Score: 700
Loan term: 6-12 months
Funding turnaround: 24-48 hours

Funding Circle offers affordable business loans with interest rates lower than alternative lenders with monthly repayment schedules for borrowers with good to excellent credit scores.

How do retail businesses get funded?

For many businesses that will lend money to the retail sector, just Googling business loans will bring up countless options, though not all will be the best option for you so you’ll need to do your research to find the best form of funding for your business.

With the newer alternative online lenders, the application process is often simple and fast. They are also likely to come to a swift decision whether they are prepared to lend to the borrower. If the application is successful the funds will be in your account within a few days.

More traditional institutions commonly have rather lengthier procedures with the lender having to climb through a few more hoops. However, these lenders are often lending large sums of money and need to make sure they are likely to get it back. The plus point is that these loans are almost always the most affordable with the longest terms.

How can I get a business loan to open a store?

You have to be realistic. Finding finance for any startup is hard and is the number one reason new businesses fail to get off the ground. Lenders want some security and nothing can replace a good credit score and time in business.

While getting funding to open a store, either bricks and mortar or online, is difficult it is not impossible. The Small Business Administration has its Microloan program and there are several other lenders prepared to offer startups funding.

If your personal credit score is good or excellent, you might consider getting a personal loan to help get you off the ground. Other alternatives are borrowing from family or friends, finding an angel investor, or applying for peer-to-peer lending websites.

How can a business benefit from a retail loan?

Almost all businesses require outside finance from time to time, especially when upscaling, but retail in particular has to respond quickly to market demands. Whatever your retail niche, you must have the hot-ticket inventory to survive whether you have the working capital or not. Retailers also need to be on top of the latest technology, be savvy with marketing, and have committed staff to get to the top and stay there.

What can a retail business loan be used for?

Most retail business loans will not be tied to any one purpose and can be used for:

  • Purchasing inventory
  • Hiring employees
  • Investing in expansion and growth
  • Marketing
  • Renovations and repairs
  • Store fixtures and supplies
  • Buying/renting brick and mortar office space
  • Legal fees
  • Utilities
  • Insurance

What are the different types of retail business loans?

  • Business line of credit: A business line of credit is the most common form of financing inventory and improving cash flow. Having agreed on a maximum sum, you can borrow against this and repay in regular installments – usually monthly. The money you repay is then available to borrow again and you only pay interest on the amount you actually borrow, not the maximum amount. So, if you have a credit limit of $150,000, but only use $30,000, you only pay the interest on the $30,000.
  • SBA 7(a) loan: The 7(a) loan is the most commonly used SBA loan program, being very flexible. The SBA operates it through approved lenders so does not lend the money itself, rather it guarantees between 75% and 85% of the loan amount. The SBA 7(a) is a blanket term for several variants but can be used for everything from purchasing real estate, buying machinery, or even loan consolidation. Terms are generous and interest rates low, but the qualification levels are high.
  • Business term loans: This is the traditional form of bank loan and once approved the money can be used for almost anything. Like SBA loans, a business term loan often offers competitive interest rates and long-term repayment but can be hard to qualify for, though short-term loans usually aren’t. A short-term loan tends to be more expensive than a long-term loan but may be easier to get. It can be used to purchase inventory, though a line of credit is more usual.
  • Equipment loan: Commonly, equipment is bought with a leasing package, though a loan is another option. Most often the finance company will offer you up to 85% of the total cost with you providing the remainder. The main point is that the equipment purchased acts as collateral for the loan so the borrower does not need to guarantee the loan or provide other collateral. Leasing deals vary. Sometimes you will own the equipment outright at the end of the contract, in other cases, you are free to walk away. Make sure you understand exactly what is involved and how much it will cost.
  • Business credit card: A credit card is best used to help cash flow and streamline your purchasing. It is not good for major investment as the interest rates tend to be higher than for other methods of borrowing.

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Are there alternatives to retail business loans?

Among the other options for retail financing are:

  • Merchant cash advance: this is one of the best options if you are already trading and most of your transactions go through a payment processor. Your payment processor will often lend you a lump sum you can use for any purpose, which is then paid back via a percentage of every transaction until the loan is paid off.
  • Accounts receivable financing: if you work in wholesale and invoice your clients, this will allow you to borrow from a third party the money you’re waiting to receive from clients. You pay it back when your client pays you, plus a fee.
  • Commercial real estate loans: these are commercial mortgages for buying or improving real estate.
  • MCA lockbox: this is like a traditional merchant cash advance (MCA) but the funds go into a lockbox which allows you to adjust how much you repay.

Many of these are appropriate for those with bad credit and are designed for high-risk businesses. Be aware they may have very high-interest rates.

What are the pros & cons of retail business loans?


  • A business loan can help you react quickly to market trends and jump on good deals.
  • Your cash flow will be improved and you can run your business without worrying about the ups and downs of the trading year.
  • A loan allows you access to the funds that you might not otherwise have so that you can grow and expand the business.


  • The loan application process may be long and complicated and require a lot of paperwork.
  • Qualifying for the most advantageous loans can be difficult.
  • A loan may not be flexible enough for your needs.
  • The repayments may be hard to meet and starve your business of cash.

5 top tips for choosing the right retail business loan

  • Find the right type of loan, not just the one you’re most likely to get: There are many options of finance for the retail entrepreneur. You should zero in on why you want the funding and how it will help your business. This will help to narrow your choices on what form of funding is best.
  • Be realistic about the costs of borrowing and repaying: Be certain of how much the finance will cost you and what is at stake if you default on repayments. If you have doubts, get professional advice.
  • Consider building your credit if it’s bad: If your credit is low it may be better to build your score before looking at getting a retail business loan. Alternatively, look into forms of borrowing that rely on your revenue rather than your creditworthiness.
  • Compare rates: the lower the interest rate, the more affordable you’ll find the loan, so spend time comparing rates.
  • Make sure you understand what you need to qualify: each type of loan is different, as is each lender. You’ll generally need a credit score of 640 or higher to qualify, 2+ years in business, and over $50,000 - $100,000 in annual revenue, so if you don’t tick any of those boxes, find out what you do qualify for before applying.

How to apply for a retail business loan

Once you have chosen a lender make certain you have all the facts and figures available before you apply. Typically you will need detailed financial records and forecasts as well as standard information like proof of who you are.

Prequalification is also often available. Although this isn’t an absolute guarantee your application will be accepted, it is a good guide and doesn’t involve a hard credit check that may impact your credit score and make it more difficult to get funding.

Start comparing rates here today and then start the application process. Once you’ve found the right loan, applied, and been approved, you’ll often receive your funds in as little as two days.

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