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If you own a clothing store, restaurant or other retail business and are looking to cover expenses, a retail business loan can be a good option. These loans offer financing to cover day-to-day expenses, purchase equipment, rent or buy real estate or pay for any other costs that go into growing your company.
With a wide range of loans available, including SBA loans, term loans, lines of credit, among others, understanding your options before accepting financing can help ensure you get the best funding for your business’s needs.
Best Retail Business Loans of 2023
BEST FOR SHORT-TERM LOANS
BEST FOR A LENDER COMPARISON SITE
BEST FOR FAST FUNDING
Factor rates start at 1.11
Best for Lines of Credit
American Express Business Blueprint™
Minimum Credit Score
of at least 660 FICO at the time of application
BEST FOR FLEXIBLE LINES OF CREDIT
BEST FOR SMALL- TO MID-SIZED BUSINESSES
BEST FOR QUICK APPROVALS
BEST FOR ESTABLISHED BUSINESSES
From participating partners via businessloans.com’s website.
BEST FOR LOAN OPTIONS
Summary: Best Retail Business Loans of November 2023
Tips for Comparing Retail Business Loans
As you compare retail business loans, consider these factors to find the loan that best fits the needs of your business:
- Loan type. Most retail business loans are either term loans or lines of credit. With a term loan, you receive the loan funds in a lump sum and repay it in regular installments. Business lines of credit, conversely, allow you to access funds on an as-needed basis, and you’ll only repay what you borrow. Depending on the type of expenses you need to cover, one option may be better than the other.
- Annual percentage rate (APR) and fees. As you shop for loans, compare APRs, which include both interest rates and fees, to find the lowest cost option. Comparing any additional fees, like prepayment penalties or late payment fees, can also show which loan is best.
- Repayment terms and schedule. Check how long you have to repay the loan and whether you’ll need to make payments on a weekly or monthly schedule. Your repayment schedule will directly impact your payment amount, as well as your long-term interest charges. A business loan calculator can help you understand how loan terms can change your cost of borrowing.
- Customer support options. A helpful and accessible customer support team can make a difference to your overall borrowing experience. Consider the lender’s support options and reviews from other borrowers. You can also explore whether the lender offers any flexibility if you have difficulty repaying your loan.
What Are Retail Business Loans?
Retail business loans offer financing for retail businesses, but they can vary in how and when you get funding, as well as how they’re repaid. Here are a few types of financing you might encounter:
- Term loan. These loans are dispersed in a lump sum and repaid in regular installments, typically monthly, over a predetermined term. You can find small business term loans from banks and online lenders, with terms ranging from a few months to several years.
- SBA 7(a) loan. Guaranteed by the SBA, SBA 7(a) loans come with competitive interest rates and generous repayment terms. You’ll need strong credit and revenue to qualify, and the application process can be lengthy.
- SBA 504/CDC loan. Also guaranteed by the SBA, 504/CDC offers up to $5 million to invest in fixed assets, such as real estate.
- SBA microloan. The SBA also backs microloans up to $50,000 that you can use to finance working capital, inventory, equipment and supplies.
- Business line of credit. A business line of credit lets you withdraw money as you need it, and you’ll only repay what you borrowed. This can be a good fit if you need to manage cash flow issues.
- Equipment financing. Equipment financing offers funds to purchase machinery or other equipment. The loan is secured by the equipment being purchased. Loan amounts can reach up to $50 million.
How Do Retail Business Loans Work?
Retail business loans provide money to keep your retail business afloat and thriving. After borrowing your loan or drawing from your line of credit, you’ll repay the amount on a weekly or monthly basis, along with interest charges and any fees.
You can find loans with terms as short as six months or as long as 25 years. SBA microloans offer small-amount loans up to $50,000, whereas SBA 7(a) and CDC/504 loans provide up to $5 million. Banks and online lenders may offer maximum amounts that fall somewhere in between.
Before borrowing, consider using a business loan calculator to estimate your borrowing costs. Let’s say, for example, that you borrow a retail business loan for $100,000 with a 10% interest rate and a five-year repayment term. Assuming a fixed rate, you’d make monthly payments of $2,125 and pay $27,482 in interest overall.
Choosing a shorter term could save you money on interest, but you’ll have higher payments from month to month. Conversely, a longer term means more affordable monthly bills, but you’ll pay more interest over the life of your loan.
How To Get a Retail Business Loan
While specific application processes vary by lender, you’ll often take these steps to get a business loan for a retail store:
- Consider your financing needs. Compare the various types of retail business loans and lines of credit to determine which type would be the best fit for your financial goals. Estimate how much you need to borrow, too, as this will help you narrow down your list of lenders.
- Review your credit. Although you’re borrowing a loan for your retail business, lenders often look at your personal credit and business credit when evaluating your application. You’ll typically need a personal score of 670 or higher to qualify for an SBA or bank loan. Alternative forms of financing, such as secured loans, equipment financing and inventory financing may have lower requirements.
- Prequalify for multiple loans. Some lenders let you prequalify for a retail business loan, allowing you to see the rates you could be offered without impacting your credit score. Consider offers from various types of lenders, including banks, credit unions and online loan providers.
- Gather the required documentation. Depending on the lender, you may need to provide a business plan, personal and business bank statements, tax returns, business licenses and, if applicable, details about your collateral. The lender may also want a detailed description of how you plan to use the loan funds.
- Submit your application. Your final step is to fill out and submit a formal loan application. You’ll provide your personal and business details, as well as upload any verifying documentation that the lender requests. If you have questions during the process, reach out to the lender’s customer support team for guidance.
How To Qualify For a Retail Business Loan
The rates and terms you get on a loan will largely depend on your and your business’s financial profile, including your credit score, revenue and time in business. Here are some common requirements to qualify for a retail business loan:
- Minimum credit score. Some lenders may accept poor or fair credit, but you’ll need a good score of at least 670 to qualify for a competitive rate.
- Business revenue. Most lenders require a minimum annual revenue of $100,000 to qualify for a small business loan.
- Time in business. Many lenders set a time in business requirement of at least six months to qualify for a loan. Others require one to two years in business.
- Business checking account. You may need to show that your business has a checking account with regular cash flow and transactions.
- Documentation. Most lenders will require a wide range of documentation to qualify for a loan, including business bank statements, tax returns, licenses, permits and proof of business registration.
We reviewed 25 popular lenders based on 16 data points in the categories of loan details, loan costs, eligibility and accessibility, customer experience and the application process. We chose the nine best lenders based on the weighting assigned to each category:
- Loan cost. 35%
- Loan details. 25%
- Customer experience. 20%
- Eligibility and accessibility. 10%
- Application process. 10%
Within each major category, we also considered several characteristics, including available loan amounts, repayment terms and applicable fees. We also looked at minimum credit score and time in business requirements and the geographic availability of the lender. Finally, we evaluated each provider’s customer support tools, borrower perks and features that simplify the borrowing process—like online applications, prequalification options and mobile apps.
Where appropriate, we awarded partial points depending on how well a lender met each criterion.
To learn more about how Forbes Advisor rates lenders, and our editorial process, check out our Loans Rating & Review Methodology.
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