Furniture Store Business Loans: Home Furnishing Financing Options

Furniture and Home Furnishing Industry Analysis

The Great Recession of 2008 drastically affected every single industry in the United States, and many businesses are still struggling to recover. The housing market was terribly affected, leading to furniture and home furnishing stores taking a huge hit; however, since the housing market has rebounded in the past few years and disposable income has increased for consumers, the furniture and home furnishing industry is doing incredibly well. Furniture and home furnishing industry analysts at Furniture Today are claiming that 2016 did not live up to the potential they thought it would have. Upon further reading, it became evident that even though 2016 was not the top year for most furniture and home furnishing stores, it was still a phenomenal year.

In 2015, the furniture and home furnishing industry saw revenues reaching over $100 billion for the first time with a 3.9 percent gain. In 2016, the profits for the furniture and home furnishing industry totaled $104.8 billion with a 2.7 percent gain – and the year ended with extreme optimism for the future profits of 2017. When it comes to employment, the furniture and home furnishing industry employed just under 500,000 by December 2016.

The furniture and home furnishing industry has remained a vital component to the United States economy, especially because it is a strong indicator of how well (or poor) the housing market is doing in the United States. Industry analysts are predicting a stable economic outlook well into 2019 with a 2.9 percent annual rate, reaching over $111 billion. This number is directly correlated to the improved housing market and increased desire among Millennials to start buying homes. According to the industry analysts, 57 percent of Millennial home renters believe owning a house is an important goal, whereas 38 percent of Gen Xers and 34 percent of Baby Boomers felt the same. While Millennials have been slow to purchase houses, particularly because of the massive amount of student debt most of them are in, this shows hope for the upcoming future of the furniture and home furnishing industry.

Home Furnishing Store Trends

There are plenty of positive statistics when it comes to the furniture and home furnishing industry, however there are many furniture and home furnishing businesses that have been slow to adopt vital business practices to succeed in the changing market. Furniture retailers are now dealing with shifting consumer preferences, rapidly changing technological innovations, and increased competition from online furniture and home furnishing stores. To compete with incumbent and online startup furniture and home furnishing businesses, focusing on these key trends is essential:

Technology: For any retail business, technology has revolutionized the way business is done. For many furniture and home furnishing retailers, focusing on effective Point of Sale systems that are up to date with the technologically savvy Millennial generation is unavoidable. There are a variety of systems that allow furniture and home furnishing retailers to speed up the check out process, as well as many back of the house technology systems that will increase productivity. For back of the house systems, many furniture and home furnishing companies are looking to implement effective cloud based systems that can integrate all aspects of the business. Through these cloud based systems, many furniture and home furnishing retailers are seeing better inventory management, increased profitability and ease, and better consumer experiences.

Millennials and the Housing Market: As mentioned above, consumers are optimistic about increased disposable income and the housing market. When it comes to the younger generations in the United States today though, there has been a rapid decline in the number of people leaving home and living on their own. Thanks to student debt, lowing paying jobs, and Millennials still being scarred from the Great Recession, many young people today have been hesitant to invest in homes – but this is changing. Millennials are starting to delve into the housing market, and that means that they will have to furnish their new homes. For furniture and home furnishing businesses, catering to this key demographic is vital for a successful business.

Smart Furniture: Technology is taking over the world, and consumers are becoming heavily reliant on smart products, especially in the home. Consumers today like smart phones, smart appliances, smart clothing, and the new fad – smart furniture. For example, IKEA, one of the United States largest furniture and home furnishing company, launched a ton of wireless charging products for the home (i.e. tables, lamps, pads, etc.). There are also a variety of smart furniture products for home healthcare that can monitor a person’s blood pressure, heart rate, breathing, weight, body temperature, sleep quality, and other vital physiological features.

Ecommerce and Omnichannels: Ecommerce and Mcommerce (mobile commerce) is being viewed as the biggest source of growth, and biggest disrupter, in the furniture and home furnishing industry today. The evolution of ecommerce and omnichannels has allowed many startups to create online platforms to sell majorly discounted furniture to cater to the needs of younger generations. While this has increased competition in the furniture and home furnishing industry, many incumbent furniture and home furnishing stores are looking to stay ahead of the competition by integrating all of their platforms for consumer ease. Offering ecommerce websites, mcommerce websites, and omnichannel options for consumers is vital to competing in the furniture and home furnishing industry today.

Sustainable, Green Furniture: Most people are aware of the rapidly evolving environmental concerns plaguing our world today, which has led to consumers demanding environmentally friendly products. The sustainability and green movement has affected every single industry in the United States today, and the furniture and home furnishing industry is no different. With the furniture industry in particular, many customers are worried about the major deforestation issues going on in the world. Due to this concern, many furniture and home furnishing retailers are finding alternative materials to create affordable and intriguing products for consumers.

Alternative Furniture Categories: Many consumers like to have options, which is why so many furniture retailers are adding quality home office furniture, luxury furniture options, and multi-functional and versatile furniture. Many furniture and home furnishing businesses are seeing popularity gaining in these particular furniture categories.

Furniture Store Loan Uses

Working Capital: Operating capital is needed by every business — especially with a business that requires considerable floor space, inventory and staffing like the furniture and home improvement industry. Having financing in place to help with a furniture store’s cash flow is extremely important.

Inventory: Running a furniture store requires quarterly and annual turnover of furniture inventory. Sometimes having sufficient operating capital available to purchase new inventory may require some sort of deft financing.

Payroll: With a retail furniture store comes the need for employees to handle warehousing of furniture, sales people, deliverers, etc.. All of those costs are required on a weekly or bi-weekly basis, and sometimes a dip in cash-flow will require the need for retail financing.

Expenses: All other expenses that come about in normal business operations, including the need to pay a lease or mortgage, replacing equipment, marketing and advertising, paying taxes and just about any other use.

Furniture Store Loan Comparison

Types	Rates	Terms	Funding
Bank	6-10%	3-7 years	14-30 days
Line of Credit	5-15%	1 – 3 years	7-30 days
SBA	5-8%	3-25 years	30-60 days
Alternative	6-25%	1-5 years	5-7 days
Cash Advance	1.16-1.55	3-24 months	1-3 days

Furniture Store Bank Loans

Conventional lenders offer term loans and lines of credit that are optimal for any furniture store in need of traditional financing. Must have good credit and the business needs to show solid financials.

Rates: 5-10%
Terms: 1-10 years

Documents a furniture store needs for a bank loan:

Tax returns
Income statements
Balance sheets
Schedule of liabilities
Personal financial statement

Furniture Store SBA Loans

Rates that are comparable to those offered by traditional lenders. SBA financing requires trying to obtain a conventional loan, and then seeking the SBA enhancement after all traditional lending routes have been exhausted. If approved, you will obtain bank-rates.

Rates: 5-8%
Terms: 3-25 years

Documents required for a furniture store to get approved for SBA financing:

Furniture store tax returns
Furniture store income statements
Balance sheets
Schedule of liabilities
Personal financial statement

Alternative Furniture Store Business Loans

Alternative loans are perfect for furniture stores in need of working capital that have good credit, but weren’t able to qualify for a bank loan. Credit and profitability requirements for a furniture store alternative loan are much lower than a bank would require, and fund in a fraction of the time.

Rates: 8-25%
Terms: 1-5 years

Documents needed for a furniture store alternative loan:

Furniture store tax returns (2 years)
P&L
Application
Bank statements

Furniture Store Cash Advance

Furniture store cash advances are the sale of future store revenues to a 3rd party in exchange for quick funding. Factoring cash advances can either be done using the furniture stores credit card processing account or through the business main operating bank account.

Factor rates: 1.16-1.50
Terms: 4-24 months