Retail Business Loans: Best Financing Options in 2024

No matter what types of goods you sell, you are prone to ebbs and flows in your cash flow. In addition, you likely have high overhead expenses and may find it a real challenge to maintain the correct inventory levels.

Retail business loans can provide you with capital that will steer you toward success, even when the competition is fierce and business is slower than usual. Below, our experts dive deep into the various small business loans available so you can choose the best options for your unique venture.

If you shop around, you’ll find plenty of retail business loans. That’s why it’s a good idea to explore all of your options. In this review, we highlight the terms, rates and fees of each lender and explain what makes them a good option. We also share potential downsides of each lender, and provide a rating methodology you can use to select the best option for your needs.

Best Retail Business Loans for 2024 - Full Overview

What Are Retail Business Loans?

A retail business loan provides you with cash to pay for a wide array of expenses for your retail business. Expenses such as equipment, inventory, marketing, and more.There are several different loans available, each with its pros and cons. Most of these loans are offered by banks, credit unions, and online lenders and are available to most retail ventures, regardless of the types of goods served.

How Do Retail Business Loans Work?

Oftentimes, retail business loans provide you with large sums of money at one time. You then repay them plus interest and fees over an agreed-upon term, which can range from several months to several years or even longer.

Other retail business loans, like business lines of credit and credit cards are revolving lines of credit, meaning you can withdraw funds whenever you’d like, up to a set credit limit, which is usually based on your credit score and other factors. You’ll only pay interest on the amount you borrow.

There are also loans like merchant cash advances and invoice factoring, which you’ll repay with a percentage of your future card sales or customer invoices. These typically offer quick approvals and fast funding.

When you do your research on various retail business loans, you’ll find that some of them are easier to qualify for than others. Merchant cash advances and equipment financing, for example, are more lenient than traditional term loans and lines of credit.

How to Choose The Best Retail Business Loan

• Loan features: Loan features refer to loan amounts, terms, and repayment plans, which vary greatly. If you hope to run a retail store, large amounts, lengthy terms, and flexible repayments are ideal.
• Application process: Fortunately, many lenders offer fast, online applications that you can complete within minutes. As the owner of a retail business, you may also benefit from a prequalification tool that lets you check your offers without hurting your credit.
• Interest rates and fees: Since it’s expensive to launch and operate a retail business, loans with low interest rates and minimum to no fees are preferred as they can potentially save you hundreds or even thousands of dollars.
• Qualification process: Some loans are designed for retail startups that haven’t been around for very long while others are intended for more established ventures with strong credit and high revenue. 
• Customer support: High customer service ratings can give you the peace of mind you deserve. Depending on the lender, you may receive the loan assistance you need via phone, email, live chat, or resources on the lender’s website.
• Online user reviews: Third-party reviews and ratings on sites like Trustpilot and Better Business Bureau (BBB) uncover the reputation of a lender, which should be important to you as a retail business owner.
• Perks and bonuses: Perks can make any retail business loan more attractive. These might include a robust mobile app, hardship assistance, and mentoring.

How Can You Use Retail Business Loans?

Retail business loans are flexible so you can use them to cover virtually any expense to start or run your retail store, including:

• Inventory: The right amount of inventory for your target audience is vital. Retail business loans can help you ensure you always have enough on hand.
• Expansion: If your retail store is a real hit and you’re pleased with your profits, you might want to open new locations. You can use a retail business loan to assist with your expansion costs.
• Equipment: Even if you run your retail business loan online, you’ll need to invest in equipment, which is often very expensive. Equipment financing offers a great way to buy or lease equipment.
• Technology: Advanced technology can help your store stand out from the crowd. You may want to take out a retail business loan to pay for an intuitive mobile app, cutting-edge CRM system, or payment services, such as Apple Pay and Google Pay.
• Interior Updates: If you have a brick-and-mortar location, you want to ensure it's inviting and attractive. A retail business loan may help you finance renovations.
• Marketing: Even if you’ve been around for years and have a loyal customer base, you can’t go wrong with marketing. With a retail business loan, you can fund social media ads, direct mail, email marketing, radio spots, and other marketing initiatives that may take your retail store to the next level.

How To Qualify for Retail Business Loan?

Each lender has its own unique qualification requirements. In most cases, however, they will consider the following factors:

• Financial history: Most lenders like to see at least several months of financial history to prove that you can repay what you borrow. Rest assured if you’re a startup, they may still approve you.
• Business plan: A well-written business plan can show lenders what you intend to do with the funds. It should include descriptions of all of your major expenses, including startup costs, working capital costs, and expansion costs.
• Credit scores: Lenders will look at your personal and business credit scores to determine how creditworthy you are as a borrower. Of course, the higher your scores are, the more likely you are to get approved with favorable rates and terms.
• Business history: A business history is often just as important as financial history. The longer you’ve been around, the more comfortable a lender will be with lending you money.

How Much Does It Cost To Finance a Retail Business?

The costs to open a retail business depend on the type of goods you sell, the size of your store, and your location. Whether it’s brick-and-mortar, e-commerce, or both will make a difference as well. On average, however, you can expect to pay around $48,000 for a brick-and-mortar store and a bit less for a solely online venture. You’ll likely have to pay these startup costs:

• Permitting and licensing fees: These vary from state to state and must be obtained before you open your retail store.
• Business entity formation: Once you decide what kind of entity you want to be, you’ll need to pay anywhere from $150 to $300.
• Insurance: At the very least, you’ll need worker’s compensation, general business, and liability insurance, which may run you between $500 to $2,000 per year.
• Commercial property: The amount it will cost you to lease or buy a storefront will depend on location.

How To Improve Your Chances of Getting a Retail Business Loan?

There are many ways you can increase your likelihood of getting approved for a retail business loan, including:

• Choose a realistic amount: Be sure to ask for the right amount of funding. While you don’t want to overestimate this figure, you also want to ensure it’s large enough to meet your needs. Consult a CPA or a financial professional for guidance.
• Find the right type of loan: Not all retail business loans are created. Apply for the financing options that make sense for your unique situation.
• Offer collateral: If you’re a startup or newer business, you may have greater success with secured loans that require collateral or an asset that you own. This may be commercial property, a company vehicle, or equipment.
• Be professional: While this may seem obvious, it’s important to remember to be professional any time you communicate with a potential lender via phone or email. In addition, be honest and transparent.

Conclusion

Retail business loans can make your life easier if your goal is to start or expand any type of retail store. Before you sign on the dotted line, however, make sure you understand the loan terms and feel confident that you’ll be able to repay what you borrow. Best of luck with your retail venture.