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Retail Loans & Storefront Business Financing

Retail Business Loans

The retail business industry is so much more than retail clothing and the latest housing furnishings – According to the United States Census Bureau, the retail trade sector encompasses a wide variety of store and non-store retailers; this includes car dealers, boat dealers, automotive parts and accessory stores, furniture stores, electronics and appliance stores, hardware stores, outdoor power equipment stores, and so much more. Really, most businesses are retail businesses. Any business that sells finished goods and/or services to consumers fall under the retail business industry.

For years, retail businesses largely consisted of large department stores and chains at local malls, but with younger generations demanding a more exciting and consumer specific experience, many consumers are starting to love small, local retail businesses again. Not only is this being expressed by consumers through social media and word of mouth, but many the United States Department of Commerce has shown a steady increase of sales for retail businesses that has increased the GDP over the past few years. This is a great sign considering the large hit many retail businesses took during the Great Recession. However, many retail business owners, no matter the specific industry, should be focusing on the growing trends relevant to their industry, as well as remembering that there is always a need for financing options when running a retail business.

Reasons Retail Businesses Need Financing

  • Inventory and Inventory Management: Inventory is one of the most important aspects of any retail business – especially since it is usually a retail business owner’s most significant current asset. The Small Business Administration shows that small business owners typically need finance options for four main reasons: to start a business, expand a business, strengthen the businesses financial foundation, and to purchase inventory. This is the lifeblood of any retail business, especially when it comes to stocking up for peak seasons, or even purchasing bulk items when offered a great deal from a vendor. In conjunction with making sure to have enough of the right type of inventory, all retail business owners must make sure they are on top of their inventory management and inventory control. These necessities have been made much easier thanks to the evolution of technology, and many retail businesses are noticing improved capital by purchasing these inventory management systems – say goodbye to constantly missing inventory or too much of the wrong product!
  • Payroll and Hiring New Employees: In addition to inventory, payroll costs are vital to any retail business. Employees are incredibly important in the retail business industry, more so than any other industry. Without exceptional customer service from a retail business owner’s employees, sales will plummet. In today’s technology driven society, many consumers prefer to do their own research before entering a brick and mortar retail storefront, however once that customer is in the door, it is up to the retail employees to up sale and provide the best possible consumer experience – how many retail business owners can expect that from their employees if they are not covering staff payroll costs? There are always finance options available to retail business owners who are struggling to cover this necessary cost.
  • Equipment: Depending on the type of retail business, the needed equipment to run that retail business will vary from other retail businesses (i.e. auto retail shops versus clothing retail shops), however no matter the specific retail business niche, every single retail business needs to start investing in more technologically advanced equipment. For example, there are endless amounts of top of the line security systems to deal with theft issues. Obtaining financing for equipment can also involve equipment for stocking a retail business owner’s office, employee break room, or even equipment that allows a retail business to expand into offering services in conjunction with retail products. There are endless amounts of uses for equipment funding.
  • Technology: Technological advancements are dominating every industry in the world today, and the retail business industry is no different. Some of the major implementations for technology in retail businesses that all retail business owners should be investing in include:
    • Point of Sale Systems: Many advanced Point of Sales systems today offer the ability to efficiently ring up customers, track inventory, give a retail business owner notification’s when it is time to reorder a popular item, and many other real time information of inventory and consumer data. Most of these Point of Sale systems today are even available through the use of a tablet, allowing cashiers to be mobile when ringing up customers in incredibly large lines; thus, this not only enhances the retail business owner’s life, but it also enhances the consumer experience.
    • Credit and Debit Card Processing Systems: Many consumers today are switching their debit and credit cards to “chip” cards, mainly due to the increase in data breaches across the retail industry. By implementing a credit and debit card processing system that accepts these secure payments, this will help increase consumer confidence in retail establishments. Also, any retail business lacking the ability to accept credit and debit cards will lose out on a ton of business because most consumers today do not even carry cash! Implementing these credit card processing systems can be expensive up front, so considering finance options can help cover these costs.
    • Consumer Data: There are so many different ways to track consumer purchases and preferences for brick and mortar retail store fronts today (and obviously online as well). Retail business owners can track these consumer needs and wants through ‘digital bread crumbs’; this varies from business to business, but usually includes utilizing data from consumer credit card purchases or through the use of tracking a consumer who is using a retail businesses’ mobile app through the store to see where they hover the most.
    • Ecommerce: Most retail shoppers today are buying more and more products online, so making sure to implement a successful, easy to use online website in conjunction with a brick and mortar retail storefront is essential. The bigger the online presence, the better any retail business will do.
    • Online and Omnichannel Presence: mobile app/website, social media, etc In addition to having a successful ecommerce website, many retail businesses are seeing increased profitability through the creation of mobile websites, retail mobile apps, and a dominating social media presence. This is the best way to reach a large variety of consumers while making sure each consumer feels a personalized connection to a retail business storefront. Retail business owners investing in growing their omnichannel presence are already reaping the rewards.
  • Pop-Up Storefronts: A new growing trend in the retail business industry is pop-up shops. Through the use of clever websites many retail business owners are using this trendy idea to connect with consumers in new and exciting ways, sell more offline, build brand awareness, and test new products – it is also a cheaper alternative then renting for some retail businesses! Even the big name brands like eBay and Target are jumping on this new trendy bandwagon, so considering financing options to help fund a test run of a pop up storefront could help build any retail business.

Types of Retail Trade 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

Retail Storefront Bank Financing

Every retail business owner in need of financing would prefer a conventional bank loan because they are simply the healthiest funding option avaiable for just about any small business. Unlike the quick funding cash advances and alternative loans, traditional lending requires patience, as the process can take weeks if not months to complete. But if you do end up qualifying it will be well worth it from a debt-service perspective. Conventional loans are used for just about any business purpose, including purchasing commercial real estate, refinancing commercial property, working capital, inventory, etc..

  • Rates: 5-10%
  • Terms: 1-25 years

Retail Storefront SBA Loans

An underutilized form of financing for merchants who want healthy, conventional financing rates, but have been unable to get a traditional lender to provide funding, a good option would be to seek a SBA loan. SBA financing is simply a traditional lending in which the lender requests a SBA guarantee (where the government agrees to cover much of the lender’s losses should the retail merchant fail to repay their loan). By reducing the lender’s risk exposure the government hopes to encourage lending to small business owners who have solid businesses, but don’t quite meet traditional lenders’ requirements. SBA loans are used to purchase real estate, purchase businesses, refinance and consolidate business debt, build-out expenses, inventory, payroll, etc..

  • Rates: 6-8%
  • Terms: 3-25 years

Alternative Retail Store Loans

Alternative loans have stepped into a space between bank-rate lenders, and higher-risk cash advance funders. The best alternative business loans have rates that are very affordable, with a funding process that is much faster and easier than going through a bank or credit union.

  • Rates: 9-25%
  • Terms: 1-5 years

Asset Based Retail Trade Loans

For owners of retail stores in need of financing who also own their commercial real estate or personal real estate, an option could be to use such real estate as collateral to help fund their business. Asset based lenders may take a 1st, 2nd or even 3rd position on the real estate in conjuction with providing term loans or lines of credit.

  • Rates: 8-25%
  • Terms: 6 months – 3 years

Retail Trade Equipment Leasing

If your retail business needs new, up-to-date business equipment immediately, a good option is to consider equipment leasing. While a loan may provide you financing to purchase the equipment outright, some businesses don’t want to be stuck with equipment long-term that may be outdated in a year or two. Equipment leasing allows retail stores to get the equipment or machinery they need without the long-term commitment. This allows a retail business owner to obtain equipment immediately without having to pay full, up front costs.

  • Rates: 6-20%
  • Terms: 1-10 years

Retail Cash Advances

Clearly the fastest funding option of all, a cash advance can fund within a day or two. The downside is you can expect rates that are extremely high as compared to an amortizing loan. A cash advance (both ach loans and credit card processing loans) are the sale of future revenues in exchange for short term financing. With a retail merchant cash advance, the store agrees to sell a percentage of future credit card deposits, whereas with a business cash advance the retail store sells future bank account deposits. Cash advances are used for a variety of purposes, but the most common is for fast working capital. But one should be careful, as some merchant find themselves stacking multiple advances without a way to consolidate them.

  • Factor Rates: 1.16-1.50%
  • Terms: 4 months – 2 years

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