Top 5 Financing Options for Retail Business Owners
Owning a business in the retail market comes with cash flow challenges that can have an effect on your growth strategy. Having easy access to working capital is key to maximize your growth potential.
1. Business Line of Credit for Retailers
If your market segment has seasonal trends that create gaps in cash flow, a business line of credit is usually the best funding option. With a business line of credit, you get approved by a lender for a fixed amount of credit (similar to a credit card).
The biggest advantage of having a credit line is that you only pay interest on funds you withdraw. It's a good hybrid lending solution between a traditional term loan and a business credit card.
Best suited for:
Retail businesses that need money for occasional expenses like renovations, stocking up on inventory, and hiring short-term staff to handle seasonal demand.
Line of credit at a glance:
- Interest rates on Clarify's marketplace starting as low as 6%
- On-demand working capital anytime you need it
- Funded within 24-48 hours with minimal paperwork
- Only pay interest on funds used with no fixed costs
- No pre-payment penalties
- Helps improve your personal credit score
2. Short-Term Loans for Retailers
When you're in a crunch to meet payroll or pay for unanticipated expenses, term loans are the fastest funding option. Since unsecured term loans require no collateral, you can quickly get money in the bank with minimal paperwork.
A key advantage of short term loans is that most retailers can get approved -- even with bad credit. The speed at which term loan applications get approved makes it the preferred choice for owners looking to get back to focusing on running their company.
Best suited for:
Retail businesses who need flexible financing with payment terms that are tailored to their cash flow. Term lengths range between 6 months to 2 years.
Short term loans at a glance:
- Fast approval and funding
- No collateral needed
- 6-month to 24-month term length
- APR starting at 7% on Clarify's marketplace
- Interest paid on principal loan amount is tax deductible
3. Equipment Financing for Retailers
Equipment purchases can range from a computer and point-of-sale software to restaurant kitchen appliances. An equipment financing loan can pay for 100% of the cost upfront and break the expenses down into manageable monthly payments.
The core benefit is the ability to borrow up to 100% value of the equipment, which makes investing in new equipment possible with minimal paperwork. Since the equipment you're buying serves as the collateral, you can get approved even with bad credit.
Best suited for:
Financing any type of equipment needed for your business, regardless of your personal credit score.
Equipment loans at a glance:
- Finance up to 100% of equipment costs
- APR as low as 6% on Clarify's marketplace
- Fast approval and funding within 1-2 days
- Simple, monthly payment terms
- Low documentation requirements
4. Inventory Financing for Retailers
Inventory is the lifeline of every retailer. Maybe you're a bar who wants to stock up on wines or an electronics store scaling up inventory for the holiday season.
Similar to an equipment loan, inventory financing is a self-secured funding option that allows you to buy goods without the need for extra collateral. Alternative lenders are usually the best option -- as traditional banks only approve large, established wholesalers and retailers. Clarify's lending marketplace makes the process easy as pie.
Best suited for:
Product-based business owners looking to stock up prior to a seasonal spike in sales.
Inventory financing at a glance:
- No collateral needed apart from the inventory itself
- Low credit score requirements
- Funded within 24-48 hours
- Monthly payment terms
- APR starting as low as 6%
5. SBA 7(a) Loans for Retailers
The holy grail of financing, SBA loans are the best option if you have the patience, good credit score, and business history to qualify. The federal Small Business Administration backs up to 80% of your loan amount through its approved lending institutions. The downside to SBA 7(a) loans are the strict financial requirements and lengthy paperwork needed.
Best suited for:
Retailers with an excellent credit score, time in business, and no urgent need for funding.
SBA 7(a) loans at a glance:
- Excellent credit score needed
- Partially backed by the SBA
- Interest rates as low as 5.75%
- Long term lengths
- Low down payments