Finding the right loan is crucial when it comes to starting your first business or expanding into new markets, and when it comes to running a retail business, there are plenty of financing options available. There are business loans for just about everything, from buying your retail space to solving short-term cash flow issues, stocking up on inventory during busy seasons or paying for advertising to attract new customers.
How can a loan help my business?
Finding the right type of financing can help you get your retail store off the ground or expand your operations. Here are some common expenses that you can fund with a loan:
- Purchase equipment. The equipment your business needs can range from a laptop and bookkeeping software to industrial-grade restaurant equipment. If you need to purchase equipment, a business loan can cover the upfront cost and allow you to spread payments out over time.
- Purchase inventory. Retail shops often need to buy inventory in bulk. A business loan can be used to stock your shelves and keep the racks full during a busy season.
- Increase working capital. The day-to-day costs of a business can fluctuate rapidly depending on what your retail business handles. Whether you’re facing a dry spell and need extra inventory or you need to hire extra help during the busy season, a business loan can help you with your working capital.
- Invest in marketing. The cost of new website design or a slick advertisement can add up quickly. A business loan can give you the money you need to hire the best talent so you can give your customers a reason to keep shopping with you.
- Purchase real estate. If you’re ready to expand your retail business from online to a physical location, a loan can help you finance the purchase of real estate.
Compare loans for your retail business
Representative example: Michael and Jane expand their liquor store
Michael and Jane want to greatly expand their liquor store, so they can offer a wider range of affordable and high end choices. The cost of renovations, shelving, equipment, installation and inventory will be around $100,000.00, which Michael and Jayne intend to cover with a business loan. With good personal and business credit scores, and using their existing property and equipment as security, they get approved by an online lender for a 4-year loan with an interest rate of 7.25%.
|Cost of expanding the liquor store
|Interest rate (APR)
|Origination fee of 3.00% ($3,000.00)
|Total loan cost
*The information in this example, including rates, fees and terms, is provided as a representative transaction. The actual cost of the product may vary depending on the retailer, the product specs and other factors.
8 types of business financing to consider
What type of financing does your retail business need to succeed? By considering how these companies typically generate revenue and common expenses specific to these businesses, we’ve listed eight types of financing that could most benefit a retail business.
|Line of credit
|Business credit card
|Credit limits up to $20,000 or higher
|Unsecured business loan
|Merchant cash advance
|Up to $300,000
|Generally up to 65% of the property’s value, but up to 80% in some circumstances
|The cost of the equipment you need to purchase, or a percentage of it
|Up to $1,000,000
What option is best for my business?
The right loan for your business depends on a number of factors, including:
- Your needs. The loan you choose will vary depending on whether you want to buy a retail space, purchase equipment, manage cash flow fluctuations or satisfy a range of other financial requirements.
- Your assets. If you have valuable assets you can use as collateral for a loan, you may be able to access a wider range of loan options or get a better rate.
- Your credit history. While there are loan options available for borrowers with bad credit, having a good credit history improves your chances of finding a good loan at a low rate.
Expenses to consider when opening a new retail business
Starting a new business can be a huge undertaking that many people aren’t prepared for. To stand out, you need to have the capital to purchase everything you need. Understand the costs of setting up shop by factoring these common expenses into your loan decision:
- Purchasing or leasing a retail space.
- Buying fixtures like furniture, shelving and display cases.
- Purchasing equipment like computers, cash registers and security cameras.
- Hiring and paying staff.
- Footing initial marketing and advertising costs.
- Purchasing inventory.
- Buying office supplies.
- Paying for insurance coverage.
- Covering Internet, phone and power connections.
- Seeking professional legal and accounting services.
Even if you’re not running a brick-and-mortar storefront, many of these costs still apply. There are also some additional costs that online retailers need to consider that some physical locations don’t. These include web design, SEO optimization and finding suitable warehouse space to store your inventory.
The best way to wrap your head around the full cost of opening a new business is to put together a comprehensive business plan that outlines your startup costs and operating expenses. Include a realistic timeframe for how long it will take you to break even and start making a profit.
Expenses to consider when purchasing an existing business
If you’re buying an existing business, the good news is that the previous owners have already done some of the hard work for you. The bad news is that they may not have been running the business as successfully as possible. You may have some extra expenses to help your new retail store perform to its full potential that include:
- The cost of buying the retail business.
- The cost of purchasing or leasing retail space.
- Improvements and upgrades to old equipment.
- Upgrades to shop fixtures.
- Purchasing new inventory.
- Paying staff and hiring new team members.
- Marketing and advertising costs.
- Insurance coverage.
- Professional legal and accounting services.
Do your due diligence before purchasing an existing business. Consider why the current owner is selling and look at the sales, operating costs, profits, assets and liabilities of the business before you decide to buy.
What types of retail businesses can get a loan?
No matter what your store sells or your inventory, there’s likely financing out there to help your business. The list below is a short overview of potential businesses that can find financing through a business loan.
- Supermarkets and grocery stores
- Convenience stores
- Fashion retailers
- Footwear retailers
- Toiletries and cosmetics stores
- Furniture stores
- Homewares retailers
- Appliance retailers
- Electronics retailers
- Sporting goods stores
- Gift shops
- Book stores
- Discount and variety stores
- Health stores
- Jewelry stores
- Toy stores
- Pet stores
4 tips to easily apply for a business loan
Keep these four tips in mind when prepping for your business loan application.
- Know your finances. Your loan application depends partly on your financial history. By knowing your credit score and debt-to-income ratio, you’ll be in a better position to present your business as another part of your financial future.
- Determine why you need a loan. Every business is unique, so know exactly what you need a loan for. This will help you to submit a strong application with the right lender.
- Find the right lender. No matter what type of financial institution you apply with, it’s got to be the right fit for your business. Between large banks, smaller regional credit unions, crowdfunding, P2P and online lenders, you should be able to find something that works for your business.
- Prepare your application. This should include your business plan, the financial history of you and your business, how much you need to borrow and how your loan money will be spent.
Finding a loan for your retail business doesn’t have to be difficult. Whether you’re starting from scratch, expanding your current operations or purchasing an existing business, you have loan options available to help you finance the next part of your career.
Frequently asked questions
More guides on Finder
Want to know how to get a business loan?
If you’re in the market to get a small business loan then you’ll need a plan to answer these seven questions.
2M7 Financial Solutions review
2M7 provides up to 125% of your average monthly sales in a merchant cash advance that you’ll repay incrementally based on your daily sales transactions.
TD Small Business Loan review
Find out how you can qualify for financing to purchase new assets for your business with this reputable bank.
How to refinance a business loan (CEBA included)
Use our step-by-step guide to learn how business loan refinancing works, what the eligibility requirements are and how much it costs.
Best bad credit business loans
Find out where to get a business loan with bad credit from reputable lenders.
Fast business loans in Canada: Funds in 24-72 hours
See which business lenders can approve a fast business loan. Turnaround times can be as short as one day.
6 online no-doc business loan lenders
Online no-doc business loans and lines of credit may be faster than your typical bank loan—but you could end up paying more.
Compare business loan interest rates in Canada
Find out what different types of rates lenders charge and how you can compare the costs.
Business lines of credit in Canada
Compare 10 business lines of credit from trusted lenders and learn how to find funding that suits your business.
How to get startup business loans
Compare business startup loans in Canada to grow your new business.
Ask an Expert
You must be logged in to post a comment.