Plan Ahead for Your Retail Small Business Loan

By Taylor Sisk, Staples® Contributing Writer

As any current or former Boy Scout can attest, step one of any worthwhile venture is “Be prepared.” That’s the Scout motto.

It’s also perhaps the best advice for small retail business owners, or those hoping to start a business, seeking financing for start-up or operations funding. Map out a plan. Research what’s available and what may be the best fit for your circumstances. And know that you may need to put up some collateral.

Know Your Retail Loan Potential

“Lenders will analyze your business’s loan potential and determine your rate by your ability to pay back the business loan,” says Burke Alder, a consultant with small business lending company Lendio.

“Never underestimate the importance of a strong personal credit score,” he says. “The better your personal credit score, the better your business loan options and the better your interest rate.” A score of 700 or above, Alder notes, can qualify you for the three most popular business-financing options: line of credit, business credit card and SBA loan.

A “Bankable” Plan

Of course, not everyone has a great personal credit score. In this case, Alder says, present a strong business plan and a strategy that will help your business grow in revenue month over month.

There are five key elements in a "bankable" business plan, says Cheree Warrick of, a Fairfax, VA–based company that helps entrepreneurs write business plans for securing loans and other financing. Your document should include:

1.    Market opportunity. Who's your target market, how big is the demographic and what’s your potential piece of the pie? This information establishes the case for your store.

2.    Competition. Who’s already doing what you plan to do? You don’t want to enter an already-saturated market.

3.    Customer acquisition and retention. What strategies will you use to get and keep customers? If you're unable to show how you’ll convert prospects into paying patrons who come back again and again, you'll never receive money from the bank.

4.    Team. Do you have the right people associated with the business, either as co-owners, managers, employees or advisors? “The no. 1 reason business plans are denied funding is because the team assembled within the business cannot help the organization reach its goals,” Warrick says.

5.    Financial forecasts. Can you show that you have enough money at the end of each month to pay all your business debts and personal bills and still make the loan payments? If your projections don’t show sustainability or growth, your store won’t make it.

Warrick launched her business after devising this five-point plan to help her mother get a loan. The banker was impressed.

Your Track Record

Experience is a plus. “Having a track record of strong monthly revenues helps increase the chance of getting a business loan — even when personal credit is lower than ideal,” Alder advises. “Most lenders want to see a minimum track record of six months in business.”

As you build your retail business, aim for a minimum monthly revenue of $8,000, he says. That may qualify you for innovative lending options like an Automated Clearing House advance or a merchant cash advance.

Where to Turn?

Next, research your lender options. “Know where you can go to get money,” Alder says. “Know how much you can get and how quickly. The best situation is knowing where to get capital before you need it.”

How do you know you’ve found the best option? Alder suggests using a small business lending marketplace, similar to the one recently launched by Staples and Lendio. The process works like this: You answer a few questions about your business. The marketplace matches your business to available loan options and lenders; you can see and compare all your options in one place. This will help determine your best option for where you are today and will help ensure you get the best deal available.

Be Ready to Put Some “Skin in the Game”

Just be prepared to put up collateral. “The SBA and the lender want to see the ‘skin in the game,’” says Aga Merx, vice president and SBA manager for Proficio Bank, which specializes in small-business financing in the Salt Lake City area.

“When evaluating collateral, financial institutions look at liquidation values,” Merx advises. “Furniture, fixtures, equipment and leasehold improvements do not value highly. With the insufficiency of collateral, the lenders ask the guarantors to pledge the available equity in their primary residences.”

According to her, the SBA stipulates that if the loan for a small business is not fully secured, the lender is obligated to take any and all available collateral — business assets and personal assets — for the guarantors.

So you’ve done your homework. You’re prepared. Now stride in with confidence, and strut out with the Benjamins.

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