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Jun 2015

Choosing a Loan for your Retail Business

June 20, 2015
Capify Australia

It can be frustrating when you see opportunities on the horizon and realise your current situation is limiting your potential. Businesses are constantly seeking ways of gaining their share of the market and increasing revenue. To achieve this, it can mean anything from increasing inventory, launching a promotional campaign, and expanding reach and operations. Most of the time, business improvement also means having to spend some money that you do not have on hand. During a time like this, a loan is definitely a viable solution.

 

Think hard before taking the plunge

Deciding if you need a loan is not enough reason to run to the nearest finance and business provider. You should also assess your capability to pay the loan back. It is not uncommon for a business to secure a loan only to be overwhelmed by the bills later on. In the end, they find themselves in a situation far worse than where they started.

Not everybody enjoys the fruits of their efforts almost immediately. For instance, an ad campaign may quickly increase foot traffic to your shop and therefore generate enough sales to allow you to make your loan payments as soon as the payment installments are up. On the other hand, merely increasing your inventory may require a bit more time before it significantly boosts your sales, and in the meantime, the countdown to your first and succeeding due payments has begun. This of course may not worry you as much if the installment amounts are manageable, even based on already existing sales performance.

Crunch your numbers before you take the loan. Avoid belatedly scrambling for a plan only after you have already placed yourself in the situation. Have a plan even before you ask for the money so you can focus on using your proceeds in the most efficient way possible. You do not want to be distracted by worrying about paying the lender back when in fact what you should be focusing on is how to use your additional funds to favor your business.

Proceed with even more caution if you are seeking a loan because you need money to bridge you through the low sales volume during a stretch of lean months. The bottom line is, even if sales figures remain the same and do not make additional revenue, would the repayment installments still be absorbed by current income? Remember, the loan should help and not compound the problem.

 

Your Retail Loan Options

There are a number of loans that may answer a retail shop’s needs at any given point:

Equipment Loan: An equipment loangives you a chance to improve the technology in your shop in order to better serve customers. This loan uses the equipment itself as the collateral, hence you do not put any of your existing possession on the line. This can also have an upgrade feature where you will be permitted to get the upgraded version of the equipment that you originally bought, within a given period of time.

Merchant Cash Advance: A merchant cash advance may be granted in exchange for payments deducted from your credit card sales. This may be the best option if you use a significant portion of your loan proceeds to pay off some overdue bills, which means your loan did not directly go to any plan that will spur more revenue. This seems to be the safest option for this type of situation because you do not commit to a specific fixed amount to pay. The amount deducted is always just proportionate to the credit card sales processed each month.

Unsecured Business Loan: An unsecured business loan, on the other hand, is the most generic and easiest loan product to access. It is not restricted to equipment purchase, and therefore you have more liberty to create spending plans. And being unsecured, you are absolutely not at risk of losing any prized possession. This also does not discriminate against merchants who do not have credit card facilities. A small business loan is perhaps the most accessible.

 

Picking the Right One

With a plethora of financial products to choose from, selecting the one that is appropriate and affordable can be a challenge. Nowadays you are no longer just limited to banks that are quite strict with their requirements and a tad bit slow to process. A battalion of alternative lending facilities have sprung up, giving consumers easier access to much needed funds. Pick the names you trust and compare their rates. Try to use this nifty calculator.

However, the rates are not always the bottom line. If you follow reasonable and responsible sense in making a decision, this particular endeavor may well be your best undertaking so far.

can be frustrating when you see opportunities on the horizon and realise your current situation is limiting your potential. Businesses are constantly seeking ways of gaining their share of the market and increasing revenue. To achieve this, it can mean anything from increasing inventory, launching a promotional campaign, and expanding reach and operations. Most of the time, business improvement also means having to spend some money that you do not have on hand. During a time like this, a loan is definitely a viable solution.

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