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.
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
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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
$100,000.00
Loan type
Business loan
Loan amount
$100,000.00
Interest rate (APR)
7.25%
Loan term
4 years
Additional fees
Origination fee of 3.00% ($3,000.00)
Monthly payment
$2,406.24
Total loan cost
$115,499.52
*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.
Can be used to buy or fix equipment, renovate a space or outright purchase a building or land
Competitive rates since they’re backed by the Government
Must have an annual revenue of $10 million or less
Your bank or financial provider decides your approval – not the Government
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
Lending criteria varies depending on the type of loan and the lender you select. Many lenders require that your business is registered and properly insured, that you meet a minimum annual revenue and that you’ve been running your business for a minimum period of time. Check out our guide on business loan requirements to learn more.
Yes. It’s still possible to qualify for a loan, but you’ll face more of a battle to find a lender willing to offer you funds. The best way around this is to put together a comprehensive business plan and financial forecasts. You may also want to consider asking a mortgage broker to help you compare the financing options best suited to your needs and situation.
While borrowers with a good credit history have access to a wider variety of loans with more competitive rates, there are still poor credit business loans offered by some lenders.
Tim Falk is a freelance writer for Finder. Over the course of his 15-year writing career, he has reported on a wide range of personal finance topics. Whether you're investing in stocks and ETFs, comparing savings accounts or choosing a credit card, Tim wants to make it easier for you to understand. When he’s not staring at his computer, you can usually find him exploring the great outdoors.
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