Bike Shop Loans
Apparently millennials are taking over the country, one bike lane at a time. According to the U.S. Census Bureau, there has been a 60 percent increase over the last decade of Americans who bike to work. There is a continuing increase in younger generations, and even parts of older generations, who are becoming more and more dependent on biking, but sadly, there has also been major decrease in the number of children riding bikes today. One major way that bicycle shops are trying to draw this customer base in again is by advocating for the benefits of bicycling when it comes to combating the obesity epidemic plaguing the United States today.
The bicycle shop industry has luckily been able to stay afloat, with overall sales only dropping considerably during the recession year. There has been a slow increase in sales since then, but over the past few years, bicycle shops have simply stayed the same – staying in between $6 and $6.2 billion for the past few years. However, many new and exciting trends are emerging in cities all across the United States that will have a major impact on the bicycle shop industry
Trends for the Bicycle Shop Industry
While the bicycle shop industry has seen some difficult times in the past few years, there are many exciting things happening across the United States today that are paving the way for an increased demand for more bicycles, which ultimately is great news for all bicycle shop owners out there. The major events that are starting to redefine the bicycle shop industry are largely in part due to – guess who? Millennials. While all of these emerging trends are greatly benefiting bicycle shops everywhere, considering different financing options can help during those difficult times. Here are the major reasons why there is an increase in demand for bicycles:
- Bike-Friendly Cities to Draw in Millennials: According to The Pew Charitable Trusts, many major cities are trying to attract more younger residents to bring an influx of future job creators, current workers, and for Baby Boomers who are willing to leave the cities they love to be closer to their grandchildren and children. Cities and states across the United States are now having to rethink everything they know when it comes to adding more to those cities, and making sure to attract the most mobile generation ever is essential. With more large urban cities focusing on attracting these younger generations, many bicycle shops are seeing increased profitability in these major areas.
- Bike Infrastructure: Whether a city has sunshine year around or is ridiculously cold all the time, every single major city across the United States is attempting to implement strategic bike lanes – and with more bike lanes and infrastructures comes increased bike sales at local bicycle shops. People for Bikes, a major biking organization, showed that after Honolulu installed bike barriers onto some of their major streets, there was a 71 percent increase in the amount of people using biking as their primary source of commuting. These major increases in people biking with biking infrastructure being implementing into cities was also seen in major cities such as Brooklyn, Washington DC, and Manhattan, among other cities.
- Safety: Feeling safe riding a bike through a major city is not a luxury most people have, unfortunately. However, with more cities implementing effective biking infrastructure and safety laws, more and more people across the United States are joining the alternative commuting movement. This includes cities creating effective ride sharing programs, more bike lanes, and stricter legislation to combat bicycle accidents with cars. Surprisingly though, The Pew Charitable Trusts report also showed that there has been a 31 percent decline in serious injuries for bike commuters in the last 20 years; fatalists for bicycle commuters fell from 21 per 10,000 trips in 1980 to 9 in 2008. These positive figures only continue to show the impact that these trends will have on the bicycle shop industry in the upcoming years.
- Increase in Women Biking: For every bicycle shop owner, focusing on drawing in more women bicyclists is essential. Most of the bicycle commuters or leisurely bicyclists are men. The major reasons cited for women not biking as much revolve around safety concerns, convenience, confidence, and not feeling welcome in a male dominated bicycle shop. Bicycle shop owners must be focusing on facilitating a more open environment for new and experienced women bicyclists in order to grow their business – if a bicycle shop owner is not catering towards this demographic, they are missing out on a huge key demographic.
- Bike-Friendly Legislation: Many cities in the United States are taking cues from one of the largest bicycle commuting cities in the country – Portland, Oregon (6.1 percent commuting rate). Portland decided to lower many speed limits in neighborhoods down to 20 miles per hour. The logic behind this decision that became official in 2012 was that if a car is driving 20 miles per hour or under and hits a pedestrian walking or biking, that person still has a 95 percent chance of surviving the crash – any speed above 20 MPH decreases the survival rate. This has been a major contributor to Portland being the top bicycling city in the country today, which many other states such as California and New York have started following. Other legislation that is greatly benefiting the bicycle shop industry is cities that are requiring destinations to have a certain amount of bike racks for commuters. These important legislative ventures not only increase the amount of bikers on the road, but increase bike sales across the country.
- Bike Sharing and Alternative Transportation: As many people are aware today, bike sharing has been adopted by many cities across the United States – unfortunately, this may not be a good thing for bicycle shops. While American’s are incredibly excited about the transition into more bike friendly communities that have affordable bicycles available immediately, bicycle shops will have to start creating more niche ideas, offers, and services to draw more customers in.
- Going Green: Many industries are being impacted by the green movement sweeping across the country today – while going green is actually going to be a struggle for most industries today, this is an area where most bicycle shops have been excelling at for years. Not only has biking become the cool and trendy thing to do amongst younger generations, it has also become a major way for people who care about the environment to reduce their carbon pollution. According to the Environmental Protection Agency, by biking just two days a week, a single individual can reduce their carbon footprint by an average of two tons per year! This is great news for bicycle shops everywhere, especially for those bicycle shops making an effort to spread awareness.
Types of Bicycle Shop Loans
| Types | Rates | Terms | Funding |
|---|---|---|---|
| Bank | 6-10% | 3-7 years | 14-30 days |
| SBA | 6-10% | 3-7 years | 10-30 days |
| Line of Credit | 5-15% | 1 – 3 years | 7-30 days |
| Alternative | 6-25% | 1-5 years | 5-7 days |
| Cash Advance | 1.16-1.55 | 3-24 months | 1-3 days |
Bank Financing For Bike Shops
You’ve worked hard to build your business, so when it comes time to obtain financing the best choice is to obtain a true conventional bank loan to handle your financing needs. Since conventional loans have the lowest rates of all forms of financing, you’ll be able to keep the maximum amount of money in your own pocket, rather than seeing profits wasted on repaying lots of high-interest debt. They aren’t easy to obtain, so you’re going to have to show good credit, strong financials and possibly collateral.
- Rates: 5-10%
- Terms: 1-25 years
SBA Loans For Bike Shops
Another great (and underutilized) form of small business loans is SBA financing. A bike shop considering SBA lending is making a solid choice, because SBA loans are traditional loans provided by conventional lenders in which the SBA agrees to cover their losses should the bike shop fail to repay. Therefore, the government is really reducing the lender’s risk by a considerable amount, making them more likely to lend. If you can get the SBA-enhanced guarantee, its worth it.
- Rates: 6-8%
- Terms: 3-25 years
Bike Shop Alternative Loans
Getting traditional financing is never easy — even for the most profitable business. But lets say your bicycle shop sees dips during the winter seasons which shows a decline in cash-flow. That may make it impossible to obtain a bank loan or credit union financing. The next best choice is to seek a true alternative loan. Alternative lenders don’t have the strict requirements that banks have, thus: leading to a 70% approval rate of applicants.
- Rates: 9-16%
- Terms: 1-5 years
Bike Shop Merchant Cash Advances
If you’ve given both the traditional and alternative lending options a try, but failed to obtain financing, an option may be to obtain financing by selling a portion of your future revenue in exchange for an upfront cash advance. Merchant cash advances are a type of unsecured financing in which the merchant agrees to the sale of future credit card processing transations in exchange for immediate cash. Repayment is made daily by having a percentage of each days sales taken directly from the credit card processor until repaid. A business cash advance loan is the sale of future revenue and having repayments made each day via automated clearing house (ACH). With an ACH loan, the payment is a fixed amount.
- Factor Rates: 1.16-1.50%
- Terms: 4 months – 2 years
