Best Financing and Loan Options for Clothing Stores
When it comes to financing clothing store expenses, you have options. Get funding for working capital, inventory, emergencies and more. Consider the following types of financing and business loans for clothing stores.
The U.S. Small Business Administration (SBA) partners with lenders throughout the country to provide small business owners with competitive loan terms and flexible borrower requirements.
The SBA guarantees a certain percentage of each loan, from 50–85%, depending on the loan type. Because of this, SBA-backed loans pose less of a risk for lenders, reducing the challenge small business owners often face when applying for traditional bank funding.
Popular SBA loans include the 7(a), which offers funding limits up to $5 million and maximum repayment terms of 10 years for working capital, equipment and inventory and 25 years for commercial real estate.
If your borrowing needs don’t exceed $350,000 and you need quick access to funds, consider the SBA Express loan. Interest rates are slightly higher than 7(a) loans, but you could receive funding in as few as 30 days.
Here’s more info from our experts to help your small business thrive.
Another type of small business loan for clothing stores is the term loan. Term loan financing provides one-time funding that you can use for nearly any retail business endeavor. Term loans can vary from short- to medium- to long-term.
Short-term loans can have repayment terms as condensed as 3 months, typically with daily or weekly payments until the loan is paid off. In contrast, longer term loans may be repayable in 1-5 years or more, depending on the lender. You could find term loans with maximum funding limits up to $500,000.
Business Lines of Credit
Business lines of credit are a great option for your retail store if you’ll need access to funding more than once. Keeping your account in good standing is also a solid way of building your credit history.
Business lines of credit function in a similar way to a credit card: Once approved, a lender designates your credit limit. You’re able to borrow funds up to that amount at one time or over the course of time your account’s open.
As you pay down your debt, your credit line goes up incrementally. The highlight? You’re only charged interest when you incur debt. Some lenders may charge an annual fee for a business line of credit, though, so be sure to read the fine print.
Merchant Cash Advances
If you’ve been in business less than a year and your credit score is making it tough to get a conventional loan, consider an alternative – the merchant cash advance (MCA). Depending on the lender, you could get funding in as quick as a day. Advance amounts are based on your clothing store’s projected revenue and cash flow.
Depending on your MCA type, your payments and term may be fixed or vary based on your business sales. With this type of financing, you’ll make payments daily or weekly, and your advance fee is determined by what’s known as a factor rate (not an interest rate) and it’s expressed in decimal form, such as as 1.14. To determine your total payback amount, you would take the amount you were advanced and multiply it by your factor rate.