Retail business loans

Retail business loans

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A retail business loan can provide small businesses with funds to manage their capital flow, cover day-to-day expenses, fulfill seasonal demand, and more. There are a variety of different loan options available to help fund or expand your business.

Here's what you need to know about retail business loans.

What is a retail loan

A retail loan is a type of business loan that provides funds specifically to retail shop owners who need financial assistance. It can provide funds to manage capital flow, cover the day-to-day expenses, fulfill seasonal demands, marketing expenses, pay employees, and more.

Retail is often driven by consumer trends within the current marketplace. Sometimes customers request special items or you may need to upgrade your point of sale system to keep up with demands. When funds are not available right away, retailers often utilize a retail business loan to cover these required expenses.

A shop owner can also use a retail business loan to pay employees during a slow season, invest in marketing, and buy items to better streamline their business. Luckily, there are plenty of different loan options available to help keep your business afloat within the retail industry.

How does a Bridge Loan Work

Types of Retail Business Loans

There are several different types of retail loans available to help small and growing businesses expand within the retail industry. Retail business loans include:

  • SBA 7(a) loans: 7(a) loans tend to be the most common within theSBA family of loans. With access to up to $5 million in working capital for a term of 25 years, numerous industries find that these types of loans are undoubtedly adequate for their needs. Interest rates tend to be between 7-8% depending on trade and the nature of your business. Most who go for an SBA loan will fall under this 7(a) category.
  • SBA 504/CDC loans: 504 loans are extremely specific. For example, if you are looking to purchase commercial real estate or perhaps a large piece of equipment, then this might be the program you fall under. The borrower may need to provide up to 20% of the total value, with the SBA kicking in 40% and the lender the rest. The cap on this type of loan is generally $5 million.
  • Business lines of credit: Banks, financial institutions, and other licensed consumer lenders often extend credit to creditworthy customers (though certain special-purpose lines of credit may not have creditworthiness requirements) to address fluctuating cash flow needs of the customer. The maximum amount of funds a customer is allowed to draw from a line of credit is typically called the credit limit or overdraft limit. The term credit limit is commonly used for credit cards whereas the term overdraft limit is more commonly used for bank accounts.
  • Short-term loans: Short-term business loans can be extremely beneficial during a growth period, fluctuating cash flow times, or when there is a need for seasonal purchasing. Alternatively, long-term business loans typically include larger funding amounts and lower interest rates and payments. If you know that taking the loan will put you in a position to pay back the loan quickly, a short-term loan may be the solution.
  • Equipment financing: Equipment loans are loans used to buy business equipment. Businesses will often need to purchase, replace, repair, or upgrade various kinds of equipment to process, manufacture, or produce their product.

    Equipment can include such things as phone systems, computer monitors, printers, copiers, furniture, tools, vehicles (for commercial use), specialized machinery, industrial equipment, and more.

  • Inventory financing: Inventory financing allows you to replenish your stock without utilizing additional collateral. This type of business funding works well for retail shops that need to place large inventory purchases to keep their business streamlines with the current trends on the market.

Who should apply for these types of loans

Any small or growing business can always benefit from an additional source of capital to enhance their business. There are several reasons a retail business owner would look to acquire these types of loans, including:

  • Upgrade necessary equipment
  • Expand locations
  • Purchase seasonal inventory
  • Payroll
  • Purchase commercial vehicles
  • And more!

There are several determining factors taken into consideration to determine your qualifications for these loans. To help review the various loan options, we've taken the liberty of providing the requirements for the loans listed above.

How does a Bridge Loan Work

SBA Loan Requirements

According to the U.S. Small Business Administration, the 7(a) Loan Program is the SBA's most common loan program. To be eligible for this particular loan, businesses must meet the following requirements:

  • Operate for profit
  • Be considered a small business, as defined by the SBA
  • Be engaged in, or propose to do business in, the United States or its possessions
  • Have reasonable invested equity
  • Use alternative financial resources, including personal assets, before seeking financial assistance
  • Be able to demonstrate the need for a loan
  • Use the funds for a sound business purpose
  • Not be delinquent on any existing debt obligations to the U.S Government

The SBA 504/CDC Loan Program, provides long-term, fixed-rate financing through Certified Development Companies (CDCs), SBA's community-based partners who regulate non-profits and promote economic development within their communities.

To be eligible for this particular loan, businesses must meet the following requirements:

  • Operate for-profit in the United States or its possessions
  • Have a tangible net worth of less than $15 million
  • Have an average net income of less than $5 million after federal income taxes for two years preceding your application.

These loans cannot be made to businesses engaged in nonprofit, passive, or speculative activities.

Business Line of Credit Requirements

Similar to term loans, a business line of credit will require financial records and documents to determine the financial health of your business. At a minimum, some lenders will require your business to be operational for at least six months and able to earn $25,000 in revenue. Depending on the lender, a minimum credit score of 500 or higher may be required to qualify.

During the application process, lenders typically require business line of credit applications to provide information such as personal and business tax returns, bank account information, and business financial statements. By partnering with a lender, businesses can obtain their business line of credit within a matter of days whereas banks generally have a longer wait time.

Short Term Loan Requirements

Short-term loans can help businesses obtain funds quickly to cover immediate expenses, equipment, payroll, emergency repairs, and other general business needs. These loans are not intended for large, significant needs such as purchasing real estate or acquiring another business.

The application process requires proof of ownership of your business, financial statements, tax information, P&L statements, and a copy of your driver's license. Lenders will also check your business and personal credit as well. Once approved, businesses can obtain their funds within 1-2 business days.

Equipment Financing Requirement

With equipment financing, you will work with a lender to secure your loan. Generally, they will require you to bring a quote detailing how much the new or used item will cost, or documentation of items of comparable value and utility. Most lenders will require three years of tax returns for the business, the purchase agreement of the equipment, personal financial statements, identification from each owner.

Inventory Financing Requirements

Inventory financing can be considered a line of credit or a term loan used to purchase the inventory your business needs to operate. Inventory financing can be a good funding option for businesses that need to purchase inventory to prepare for a busy season, meet an increased need in customer demand, or cover short-term cash flow gaps. This type of loan is designed to be a short-term financing solution.

Businesses do not need to be established to be eligible for inventory financing. Most lenders will require companies to be up and running in a minimum of six months to a year to qualify. Though every lender is different, lenders may require businesses to maintain an annual revenue of $100,000 and a minimum business or personal credit score of 600 or more.

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Advantages of Retail Business Loans

Not only can retail business loans provide the required funding, but they can also offer other perks that can benefit you long-term as a business owner. Most retail business loans may offer competitive interest rates, predictable monthly payments, and credit building.

These types of loans can allow business owners to invest and accelerate their growth. Keep your shelves stocks and move your business forward through the utilization of a retail business loan.

Choose First Union Lending As Your Premier Lender

At First Union Lending, we have an unwavering belief that small and medium-sized businesses deserve the right to access the capital they need to succeed.

Our goal is to build long-term, lasting relationships by providing business owners with what they need when they need it. We pride ourselves on being educated, knowledgeable, and caring when it comes to how we conduct business. We have voluntarily acquired much of the same licensing required by traditional banks to cement our fiduciary responsibility to our clients and our work culture.

We are here to consult, help you save, and guide you and your business to success.

All states we service for Retail Business Loans:

Alabama

Alaska

Arizona

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Connecticut

Delaware

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Georgia

Hawaii

Idaho

Illinois

Indiana

Iowa

Kansas

Kentucky

Louisiana

Maine

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Massachusetts

Michigan

Minnesota

Mississippi

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Nebraska

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New Jersey

New Mexico

New York

North Carolina

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Ohio

Oklahoma

Oregon

Pennsylvania

Rhode Island

South Carolina

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Tennessee

Texas

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Vermont

Virginia

Washington

West Virginia

Wisconsin

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