Financing For Sporting Goods Stores
America has been seeing a decrease in the number of children being active and participating in group sports; there were over 81 million Americans that were inactive last year. This has led to a rough few years for the sporting goods industry, however with more and more people becoming advocates for being healthy, things are looking up for the sporting goods industry. Even during difficult times, the sporting goods industry has supported over 300,000 jobs in the United States, leading to an increase of 3.4 percent of industry growth throughout 2016 and generating $150 billion in revenues globally.
The increase interest in creating health conscious consumers is now the peak interest for every business owner in the sporting goods industry. Focusing on promotional campaigns and partnering with prominent organizations to promote a healthier lifestyle has helped many smaller sporting goods stores generate more business, all while generating more awareness to the negative effects of no physical activity. However, for many sporting goods stores, there is heavy competition against major sporting goods retailers such as Dick’s Sporting Goods and Sports Authority. In order to stay ahead of these major retailers, focusing on a few key industry trends to help boost business profits is essential in staying afloat in this highly competitive market.
Sporting Goods Industry Trends
- Decline of Children in Sports: With major declines in the amount of children participating in sports, many sporting goods stores are focusing their products towards adults today. However, many sporting goods stores are forming a competitive edge by doing special promotional campaigns that encourage children to stop playing video games and get outside! This could lead to a shift in the target demographic for sporting goods stores.
- Niche Sports Items: Many people today are wanting to form relationships with small businesses, so there is a growing market for small sporting goods stores that are willing to focus on new, niche sporting good items; for example, many people are looking to experience unconventional sporting outings involving more extreme sports such as rock climbing, ice climbing, kayaking, backpacking, and more camping. Downgrading the variety of products sold at a sporting goods store to focus to a niche customer base can be key in staying afloat in this extremely competitive industry.
- E-Commerce Businesses: As with many other retail businesses, having a solid, strong online presence is essential because consumers everywhere prefer to research everything before purchasing an item – this is no different for the sporting goods industry. Also, many consumers enjoy the easy purchasing of online shopping, so making sure to incorporate a successful and easy to use e-commerce website can help boost sales in this technology driven society.
- Major Sporting Goods Retailers Filing for Bankruptcy: As many people have heard, major sporting goods retailer Sports Authority filed for bankruptcy, and Dick’s Sporting Goods (another top player in the sporting goods industry) reported a decrease in revenue these past few years. This is mainly in part due to the fierce competition this industry creates, however this is leading to many new opportunities for smaller niche sporting goods companies to emerge and prosper.
- Focusing on Apparel: The new style for American’s today is a combination of comfortable, leisurely clothes that can do it all – basically, work out apparel. Catering to this high demand is essential for small sporting goods stores looking to stay ahead of the major retailers.
Why Would a Sporting Goods Store Need Financing?
- Promotional campaigns or other forms of advertising to attract consumers through the use of promoting a healthy, active lifestyle is an essential way to build a larger customer base. However, setting up these promotional health conscious campaigns is not cheap, so reviewing the variety of finance options available to sporting goods stores is important.
- Technology is at the forefront of every business owner’s mind, especially in the sporting goods industry where technology has become a huge competitor. However, many sporting good businesses have reaped the rewards in the past few years by integrating more efficient technological components into their stores. However, replacing old equipment can be quite expensive today, so considering different finance options can help make this necessary transition.
- Inventory is a necessity in every industry, especially in the sporting goods industry. Having a plentiful inventory with diverse and popular items should be a priority for every sporting good store owner, especially during preparation for peak seasons such as the holiday’s
- Renovations and upgrades are not a necessity, but can benefit many sporting good companies looking to stay relevant and up to date. Unfortunately, people do judge books by their cover, so make sure to have a good looking establishment should be a priority. This venture can be pricey up front, there are always different loan options to help cover these costs.
- Expansion financing isn’t always easy to obtain. But if your sporting goods store finds itself needing to move into a larger space, or to expand the space they are already in, knowing your financing options are important.
- Marketing and advertising, as every sporting good business knows is needed to compete in a changing landscape. Focusing on a social media presence is vital in the new economy – especially for smaller sporting goods stores looking to compete for new, younger costumers against the big box name brands. People value local sporting good stores, but will do first hand research online before choosing their what business will fit their sporting good needs.
- Mobile websites, apps, and online creation and customization tools are essential for the sporting goods industry. As mentioned above, technology and social media are dominating every industry in the United States today, so every single sporting goods store should be implementing a creative and engaging website and app for consumers to utilize when placing orders.
- Payroll, hiring new employees, and other miscellaneous taxes and fees is a huge concern for many businesses today, especially when business gets slow.With the change in seasons come different costumers with different needs. During certain times of year a store may need to hire employees to meet the new demand.
Types of Sporting Goods Store Loans
|Line of Credit
|1 – 3 years
Sporting Goods Store Bank Loans
If your sporting goods store has been in business for at least 3 years, has good profitability and you have good credit, the best option to finance your company will almost always be from a traditional lender (bank or credit union). Uses of conventional financing may include purchasing or refinancing the commercial building, inventory, payroll, working capital and just about any other use.
- Rates: 5-10%
- Terms: 1-25 years
SBA Loans For Sporting Goods Stores
SBA loans have a reputation for being slow and painful, but a lot has changed in recent years that has sped up the process. SBA loans are a type of financing provided by conventional lenders where the government agrees to cover some of their losses if the sporting goods store fails to repay their loan. Depending on the SBA program being utilized, working capital can be delivered in just a couple of weeks.
- Rates: 6-8%
- Terms: 3-25 years
Alternative Sporting Goods Store Loans
While you may have wanted a conventional loan, its not always obtainable. If you weren’t able to find success with the traditional lending route, the next best option is to get an alternative business loan — rather than a high-interest cash advance. While alternative sporting goods loans aren’t nearly as low-rate as the bank, they are still affordable, and the financing process can be completed within 1 week
- Rates: 9-25%
- Terms: 1-5 years
Asset Based Sporting Goods Loans
Using your sporting goods store assets as collateral for financing may be a good option for stores with good receivables, or if they own their commercial or personal real estate. An ABL lender will use your company’s assets as collateral to help reduce their exposure, and in exchange will generally provide financing that wouldn’t be available from lenders that focus on cash-flow and credit only. Therefore, an ABL lender is willing to take a higher-risk because they know there is collateral supporting the loan.
- Rates: 8-25%
- Terms: 6 months – 3 years
Sporting Goods Store Cash Advance
Cash advance financing is the perfect funding option for sporting goods stores with bad credit, in need of immediate financing, or who have found themselves locked-out of other forms of funding. A business or merchant cash advance is the sale of the sporting goods future revenue in exchange for immediate funds. Therefore, a cash advance isn’t a loan, its a business to business transaction or sale. A merchant cash advance is the sale of future revenue and has a repayment method which involves sending a percentage of each day’s credit card processing deposits to the lender until the mca loan is repaid. A business cash advance is the sale of revenues involving a repayment method where a set amount is taken from each day’s bank deposits via ACH until the loan is repaid.
- Factor Rates: 1.16-1.50%
- Terms: 4 months – 2 years