Retail is a timing business dressed as a margin business
An independent retailer buys in August what sells in December. The supplier wants payment in 30 days; the customer pays at the register four months later. A store doing $1.2 million a year in sales may need $150,000 of extra inventory in the autumn and have $30,000 in the bank. The margin is fine. The timing is the problem, and it repeats every year, which is both the difficulty and the opportunity: a lender who has seen the pattern will finance it.
The other needs are the fit out of a new or renovated space, point of sale and refrigeration equipment, and the second location, each with a different right instrument.
Inventory: finance the season, not the year
The cleanest tool is a line of credit sized to the seasonal build, drawn in August and September, repaid in January. Non-bank lenders approve lines of $25,000 to $250,000 for retailers with a year of history and $20,000 or more a month in deposits, in a few days, with no tax returns. A bank line is cheaper and slower, and wants two years of returns.
Purchase order financing and supplier terms belong in the same conversation. A supplier who will extend 60 day terms on the holiday order is cheaper than any lender; it is worth asking before borrowing. A revenue-based advance works for the retailer who needs the stock in a week and will sell it in ninety days; the return on a well bought holiday inventory usually exceeds the cost of the advance, and this is one of the few cases where we say so plainly.
Equipment and the fit out
Point of sale systems, display refrigeration, commercial shelving, security, signage. Equipment financing covers the pieces that can be identified and repossessed, over two to five years, at annual rates from about 8 percent to the high teens. The fit out of the space itself, the floors, lighting, walls and fixtures that become part of the landlord's building, cannot be collateral and is financed with a term loan or SBA.
A fit out of $80,000 to $250,000 for a new location is SBA 7(a) territory when there is time, and a non-bank term loan when there is not. The landlord's tenant improvement allowance should be negotiated before either, since every dollar of allowance is a dollar not borrowed.
The second location
The second door is where retailers get into trouble, because it is financed on the strength of the first while it drains it. The rule we apply: the first store must carry the second for six months without help. SBA 7(a) finances the opening over ten years and is the right instrument for a planned expansion. An advance against the first store's revenue to open the second is the fastest way we know to lose both, and we will say so rather than place it.
What funders look at in a retail file
Three months of business bank statements with card settlements visible. Card processing statements, which show volume and chargebacks. The lease, since a retailer with eighteen months left on the lease is a different risk from one with five years. For inventory lines, a current inventory figure and the top suppliers. For larger amounts, the last tax return.
What helps: consistent daily card deposits, a long lease, a web store that adds a second deposit stream, and inventory that turns four or more times a year. What hurts: declining card volume year over year, a month to month lease, advances already in place, and inventory financed on personal cards.
A plain recommendation
Supplier terms first, always. A line of credit for the seasonal build, opened in a strong month. Equipment loans for the equipment. SBA for the fit out and the second door, planned a quarter ahead. An advance for a specific, short, well bought inventory opportunity, one at a time, repaid by the sell through.
Every offer we present shows the amount, the total repayment, the payment schedule and every fee on one page. If the holiday stock does not clear its own financing on your margins, we will tell you before you order it.