Clothing Store Loans & Boutique Financing

Financing For Clothing Stores

Mark Twain once wrote, “Clothes make the man. Naked people have little or no influence on society.” Looking at the obsession over the fashion industry today, we can see that Mark Twain was right. We have become a culture that is obsessed with our appearance, as well as a generation that truly believes the way we look, the way we choose to dress, and the body modifications we choose to permanently add to our appearance are how we define ourselves in an overpopulated world – whether we can afford it or not. (LINK1)Miuccia Prada, the designer and head of Prada fashion, stated, “Fashion is the first step out of poverty. You have nothing and then you put something on. It is one of the first things you do to elevate yourself. Why are people scandalized by spending money on clothes? Everybody is so passionate about this – there’s a resistance to fashion – an idea that to love fashion is to be stupid. Clothes are very intimate. When you get dressed, you are making public your idea about yourself, and I think that embarrasses people.” This has been true for a very long time, but millennials are changing everything, forcing retail clothing companies to completely change the way things have been done for so long, all while making it more affordable.

Retail Clothing Store Industry

As of 2015, the fashion and retail clothing industry is a $1.2 trillion global industry, with more than $250 billion spent annually on fashion in the United States. The fashion and retail clothing world is a structurally diverse industry when it comes to employment, including fashion designers, computer programmers, lawyers, accountants, social media directors, project managers, and so much more. This is a growing market that we are only seeing the beginning of. With all of the new technological advances of 2016, the game is changing and the fashion industry is about to see growth like never before – if the retail clothing businesses are willing to take all of the necessary steps to change with this new, innovative technology that consumers are demanding. So what are we going to see throughout 2016 and 2017 that will change the clothing industry, and why do retail clothing businesses need to stay on top of this to continue to compete in this diverse and competitive market?

1) Online Shopping: Online retail stores have become the number one facet for purchasing items today, and this usually happens in the middle of the night when people have tons of leisurely time. It is estimated that in the United States alone, $327 billion will be spent on online retail clothes shopping in 2016, which is 45% more than the $226 billion spent in 2012, according to studies done by Forrester Research. The online shopping community is a major aspect of the retail clothing industry that needs to be given more attention, otherwise we will see many brick-and-mortar retail clothing shops close down.

2) Social Shopping: “Social Shopping” is a term used to describe a certain form of online shopping – one that has gone from a brief fad to a legitimate way of buying clothes, and many other products, via social media. Pinterest was one of the first social media sites to take advantage and completely implement this system with great success. You can now browse Pinterest like you normally would, but can also like, browse, and purchase retail clothing items. Many large retail clothing companies are starting to implement this strategy, such as Tiffany & Co., Burberry and Cole Haan. This can be an expensive venture to launch, along with complete online stores, so reviewing financing options for your business is essential.

3) Analyzing Online and Offline Data: With today’s technology, there is no excuse for large and small clothing retail companies to not know their customers, but relying solely on online or offline data is not reliable anymore. Analyzing both data sets will give clothing retailers a better, more comprehensive picture of their customers’ tastes and preferences. According to McKinsey, big data will revolutionize what retail clothing businesses produce and purchase, and when using both sets of data to its full potential, clothing retailers could increase its operation margin by more than 60%! However, having the capital to fund studies and resources into big data for many smaller retail clothing businesses can be hard to find, so looking into a variety of financing options, such as SBA loans could help.

4) In-Store Mobile Use: There are so many different forms of technology for in-store use that is at our fingertips – and the retail clothing companies that want to stay on top will start to implement these strategies. For starters, retail trends and predictions show there are a variety of payment methods and mobile payments that we will see in more and more stores. Retail clothing companies are also starting to implement POS systems to help speed up the process of buying in stores. During peak seasons, this allows retail clothing companies to simply add another tablet or mobile device, speeding up the long lines that we all dread. Also, retail business trends show using and/or creating in store apps is essential, since 41% of consumers are using mobile apps when shopping.

5) Mobile Workforce: While there are many drastic changes happening in the front of retail clothing stores, there is even more important advances happening in the back of the house! Managing online and offline systems has become such a hassle in our technology-driven society, so we will see a huge shift for retail clothing managers opting for single-view and cloud-based systems. This form of operating systems is essential to the modern retail clothing industries’ strategy. While many larger retail clothing shops have already made this transition, we will predominately see this in medium and small scale retailers.

6) Internet of Things: Apparently, the Internet of Things is going to revolutionize everything, especially for the retail clothing and fashion industry; this is only going to enhance the shopping experience for consumers. A study by McKinsey showed that the Internet of Things, when utilized effectively in the retail market, could have an economic impact of $410 billion to $1.2 trillion per year by 2025. We have a long way to go, but we have to start somewhere. Where we are seeing this today in the retail clothing industry is through devices that automatically ring up customers, track real-time shopping behaviors, and send offers to customers based on their preferences. Things are only going to expand, and retail companies using these advantages are the ones that will stay on top. Financing options to help implement these expensive necessities are always available.

7) Fraud Management: Omnichannel is essentially everything described above – a multi-channel approach to sales that will provide an invaluable, and more efficient, shopping experience. This needs to be the key focus for all clothing retailers who want to stay on top. Facilitating the integration of online and offline channels, especially in the retail clothing and fashion industry, is essential to keeping your business booming in 2016, and the future in general. With the use of omnichannel and more overall technology, companies will be expected to look into fraud management for their companies, otherwise your company will be deemed unreliable; this is something that Millennials in particular are focused on. They don’t want to shop and spend money at a clothing store that won’t invest in protecting their information.

The moral of the story? Technology and omnichannels are already starting to dominate the retail clothing and fashion industry, so getting on board sooner rather than later will be in the best interest of every retail clothing company! Of course, this is easier said than done. All of the necessities listed above, not including payroll and all other overhead fees for running a business, are not cheap. These are the latest, most innovative tools in the industry. You don’t have to transition into these – but your business will suffer without the integration into a modern company that our technology driven society demands. Being aware of the variety of financing options available to your business is essential; these can range from traditional bank loans, SBA loans for small businesses, or even merchant cash advances and ACH loans. Listed below are the terms and rates for the variety of loan options for your clothing retail business.

Retail Clothing Store Loan Comparison

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

Clothing Store Bank Loans

For a retail clothing store looking for the best rates and lowest terms, the obvious first choice would be a bank term loan and/or line-of-credit to purchase inventory. Traditional bank loans clearly offer the healthiest funding options for retail clothing stores along with the lowest fees of all the types of business loans. Bank retail clothing store financing has rates that start is the middle single digits and terms up to 10 years.

Documents needed for a bank loan:

Retail store tax returns
Retail store income statements
Retail store balance sheets
Schedule of liabilities
Retail store owner’s personal tax returns (3 years)
Personal financial statement

SBA Clothing Store Loans

SBA loans loans for retail clothing stores offer rates that are the same as non-SBA traditional financing because the government agrees to cover a percentage of the SBA lenders losses should the retail store default on their loan. By offering this SBA guarantee, the lenders are able to provide bank-rate business loans because of the reduced risk. This is an exception form of funding for retail stores looking to refinance real estate and/or purchasing inventory

Documents needed for SBA financing:

Retail store business tax returns
Retail store income statements
Retail store balance sheets
Schedule of liabilities (list of all business debt)
Retail store owner’s tax returns (3 years)
Personal financial statement

Alternative Retail Clothing Store Loans

Another option for retail clothing stores looking for loans and financing would be a mid prime alternative loan. Alternative inventory financing allows companies that don’t have the credit, revenues or documentation required by traditional lenders to obtain fast business financing.

Documents required for alternative retail clothing store financing include:

Retail clothing store tax returns (2 years)
Retail clothing store income statements (year-to-date)
Retail clothing store balance sheets (year-to-date)
Schedule of liabilities (list of all business debt)
Personal tax returns (1 year)

Asset Based Retail Clothing Store Loans

For retail clothing store owners looking for inventory loans that currently own their commercial real estate, or own other personal real estate, an option may be asset based business loans. Using 1st, 2nd or 3rd position on commercial real estate, and retail business owner can receive up to 50% of the real estate’s equity value.

Documents needed for a retail business owner to obtain asset based financing include:

Application
Bank statements (proof of cash flow)
List of collateral
Appraisal

Retail Inventory Cash Advance

A common form of financing these days is to sell a retail stores future credit card or bank account deposits for immediate cash. Merchant cash advances (and business cash advances) are not loans by the sale of future deposits in a business-to-business transaction. The process is extremely quick — with funding happening in 1-3 days — with minimal documentation required.