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Retail Business Loans: How to Get Funding for Your Store

Written by Banks Editorial Team

Updated December 18, 2023​

5 min. read​

Are you opening the doors to your new retail store soon? Or maybe you’re already up and running and need capital to keep operations running smoothly, expand your business or avoid cash flow issues in the near or distant future. Unfortunately, not every business owner has enough funds in their bank account for their companies. A retail business loan can provide the cash you need to get started or expand your business.  

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What is a Retail Business Loan?

A retail business loan is a debt product you can use to cover operating expenses for your store. You can also use the loan proceeds to pay for start-up costs, smooth out cash flow or expand your retail business. Retail business loans help business owners get capital now instead of saving up for several years to get the same amount of cash. Each loan has a repayment plan and interest rate that impact how much you will owe for borrowing the cash. 

What You Can Use Retail Business Loans For

Small business owners can use loans to fulfill many objectives. You can use a retail loan in any way you desire. We have covered some of the ways retail shops can use the extra capital for their businesses.

Opening Up a New Store or Expanding with a New Branch

Some people use small business owners to get started. For example, you can use a small business loan to buy real estate and get started with your first retail store. If you already have a store, you can use a loan to open up a new location. It’s very difficult to save enough money to buy a commercial property 100% cash, which makes leverage a popular option. Instead of borrowing money from friends or relatives or emptying out your savings account, using a business loan can bring your vision to life. 

Renovating Your Current Store

Is your storefront outdated or in need of repairs? The lump sum cash you receive from a retail business loan can provide sufficient financing for repairs. In addition, the store modifications can provide a better experience for customers seeking a comfortable shopping location. Some renovations can also curb costs by minimizing the need for costly repairs and making your building more energy efficient to lower utility bills. 

Hiring Additional Staff

It’s vital to have enough staff on hand to keep operations flowing smoothly and provide an exceptional customer experience. However, covering payroll costs can be challenging if you’re just starting out or low on cash. Fortunately, a retail business loan can assist you by providing the capital needed to invest in hiring additional staff. Adding new workers to your team can make your company stronger and help it expand sooner. By the time you have repaid the loan, the extra productivity in the workplace could pay for itself.

Purchasing Stock or Inventory

You’ll need to keep tabs on inventory levels to ensure you have enough on hand to serve your customers. But you may not have enough cash on hand to purchase extra items for the upcoming busy season. Getting retail business funding from a loan can address inventory needs just in time for the busy season. Then, you can repay the loan with the profits you make from your goods. 

Advertising and Marketing

Word of mouth is arguably the most effective form of marketing, but it’s easier to track results with advertising and marketing. You can see analytics from your dashboard and optimize your efforts as the data arrives. You can invest in ads and do the marketing yourself or hire a marketing professional to strengthen your marketing strategy and business plan.

Types of Retail Business Loans You Can Get for Your Store

Business owners have many types of loan products to consider. You can get a loan for your small business from a bank, credit union, or online lender. If you need a quick loan application process, an online lender may be the best choice. We will discuss some of the types of financing options for retail businesses.

Business Line of Credit

A business line of credit operates like a credit card. If approved, you’ll get access to a set amount of cash to draw from on an as-needed basis. You’ll only pay interest on the amount you use, and as you make payments, the funds become available for use again until the draw period ends. So you won’t have to worry about reapplying for small business loans for the duration of your business line of credit as long as you pay it off.

Inventory Financing

Inventory financing is a secured form of funding. It uses the inventory you purchase as collateral, which means you may qualify for a lower interest rate since the lender assumes a lower level of risk. 

Equipment Financing

As the name suggests, this form of financing is also used to make equipment-related purchases. It’s also secured and uses the equipment you acquire as collateral. The application process is relatively simple, but the financing terms vary by the type of equipment purchased and the borrower’s credit profile. You can get a low-interest rate if you have a good personal credit score. 

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Working Capital Loans

Working capital loans are flexible and can cover a variety of operating expenses, usually short-term costs. However, you’ll have several months to repay what you borrow, and you may need a few years in business to qualify for funding. If you venture beyond bank loans and look at online lending solutions, the requirements are more generous. 

Small Business Term Loans

Small business term loans are often more challenging to get approved for than working capital loans. However, you’ll generally get a longer repayment period. You can repay the loan over monthly intervals, and the fixed interest rate provides more stability with your payments. You won’t have to worry about a variable interest rate potentially increasing your monthly payments. 

You can also get a loan through a U.S. Small Business Administration partner. While SBA loans have the most attractive rates and terms, they also have the most challenging requirements. It can also take 30-90 days to receive funding. You can get small business term loans not affiliated with the SBA program much more quickly. 

Merchant Cash Advance Loans

Retail business owners can use merchant cash advances to get quick cash. These lenders request repayment based on a percentage of your credit and debit card transactions. Merchant cash advances use a factor rate instead of an interest rate to determine how much you will repay. This factor rate can make the loan more expensive than most financing options, and it doesn’t include fees. Although merchant cash advance loans are an option, you should look at other loans for your small business before taking out this one.

Invoice Factoring

If you have many unpaid invoices, you can get capital without going deep into debt. Retail business owners can sell unpaid invoices to invoice factoring companies and receive capital equal to a percentage of the invoice’s face value. This strategy relieves you from having to collect payments, and you don’t get into any debt for this financing. Invoice factoring does not require your business to have a good credit score, but companies will assess your customers to determine if they can reliably pay the invoices.

How To Get a Retail Business Loan for Your Store

We have explored several financing options for retail businesses. Now it’s time to get a loan for your small business. Here’s how you can get started with the process.

1. Find a Funding Partner

There’s no shortage of lenders offering business funding solutions. But how do you know where to look to get the best deal? Start by considering providers that feature fast approvals, rapid funding timelines and a seamless loan checkout option that allows you to navigate the application process easier.

2. Prepare the Required Documentation

Before applying, it’s vital that you gather the necessary documentation to avoid any delays in the review process. For example, some lenders request your business formation documents, EIN, a copy of your most recent personal and business tax returns and recent business bank statements. Keep in mind that you may need to provide additional information and documentation, depending on the lender. Therefore, you should reach out to the lender and ask what documentation you will need before applying for a loan

3. Submit the Application

Complete and submit your application. Then, if you’re a good fit for business funding, you’ll be able to review the proposed loan terms, including the monthly payment amount, interest rates and any applicable fees, and sign the loan documents directly on the online dashboard.

4. Receive the Funds in Your Account

Some working capital loans and business term loans are funded within one business day of being approved. Others may take longer. Discuss your specific loan needs and timelines with your loan advisor.

Where to Get a Retail Business Loan

If you need financing to expand operations or open new locations for your retail store, consider the online small business lender ROK Financial. 

Specializing in small business financing, they don’t require a minimum credit score to qualify for a retail business loan as long as you have been in business for over three months and have over $15,000 in monthly gross sales.

Fill out a simple form with a few questions, and a business lending advisor will contact you to review the different options for a business loan for your store.

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