Line of Credit for Retail

Running a retail establishment requires putting in long hours, investing in products people want, hiring staff, marketing your store and more. A retail store business loan could help you fund any of the following needs, among others.

By Matthew Elling
Co-Founder and Consultant at Line of Credit Depot
Updated on February 10, 2021
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Real bank lines of credit are available across the country for the retail industry. Which State your business is located in can affect what lines of credit are available.

Despite this, most bank lines are revolving facilities. A revolving line of credit is similar to a credit card, with a predetermined limit and balance that fluctuates as money is drawn from the line and as principal is paid back. This ebb and flow of the credit facility is advantageous for owners of retail businesses. So, whether you own a brick and mortar retail store or operate solely online, a line of credit should definitely be adopted!

Retail is one of the top industries to benefit from a line of credit, because of the product purchasing and sales structure. Buy low, sell high is the business model in a nutshell, but margins can be taken over if the wrong type of debt is used to buy inventory. Normally, owners of retail stores don’t borrow money in the form of loans to purchase inventory. They have an inventory line of credit that can help them finance more goods. 

The constant balance of keeping inventory and the financial burden this causes is offset by a line of credit. The cost of goods sold, can be absorbed by the line of credit, so then as the products sell, this cost of good sold debt can be repaid and the business can make the margins. The cost of doing business to actually purchase the goods is basically the interest rate of the line of credit. This will lower your margin, or you can add this expense to the actual cost of goods. This way you can keep the same margin percentage for your business.

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Whether you own a physical or online store, you know that besides having products to sell, you also need foot traffic. A line of credit can help you bring in more customers. Advertising isn’t cheap, but if you can finance the marketing costs before sales catch up to the outlay, you would be better served. This is how a line of credit can be used. Paying upfront for advertising, before you see the results, means that you don’t have to drain business operational cash reserves that are held for general business expenses, like rent, utilities and payroll.

The qualifications to be approved for a line of credit vary by State, so please check on our website to learn about these qualifications. Most usually though, retail business owners are surprised that they qualify for a line of credit, because they are so accustomed to expensive ‘cash advance’ debt that is paid back daily or weekly. These MCA’s are not a loan, but a purchase of future receivables, where interest is front-loaded. A line of credit is completely different from a Merchant Cash Advance, because of the amortization schedule of a line of credit. This basically means that the longer you owe the debt, the more interest you will pay.
Generally, lines of credit that are offered from our ‘small business friendly banks’ start at 4% annual interest.

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