While many consider the alcohol industry to be recession proof, you know that’s not quite true. Like all businesses, you’ve experienced your ups and downs. Maybe your ups have outnumbered the downs and you’re looking to keep growing. Or perhaps you’ve had one too many downs and need a boost. Whatever the case, here are some financing options that can help.
If you’re in search of an SBA loan for your liquor store business, you have several options. Lenders that partner with the U.S. Small Business Administration (SBA) offer competitive rates and terms. Because the SBA guarantees a portion of each loan offered by a partner lender, lenders are more inclined to approve borrowers that may have been turned down for a conventional bank loan.
Two well-known SBA loan options that offer business capital include the standard 7(a) loan and the SBA Express loan.
SBA Express loans offer the quickest option, with funding available in as few as 30 days. Financing needs can’t exceed $350,000. The current maximum interest rate lenders can charge for an SBA Express loan is Prime plus 6.5% for loans of $50,000 or less and Prime plus 4.5% for loans more than $50,000. The U.S. Prime Rate was 4.75%, as of February 4, 2020.
SBA 7(a) loans, in contrast, allow approved borrowers funding up to $5 million. Repayment terms range from 5-10 years for working capital and machinery, or 25 years for real estate. Use funding to purchase another building, renovate your storefront, refinance debt and more. Interest rates will vary depending on the loan amount and repayment term. Variable rates on standard SBA 7(a) loans range from a base rate plus 2.25%-4.75%.
If your credit score is at least in the 620-650 range you could be eligible for an SBA loan for your liquor store.
Here’s more info from our experts to help your small business thrive.
Lines of Credit
If your liquor store financing needs vary throughout the year, consider this flexible funding option. With a business line of credit, you’re approved for a maximum credit line, let’s say $10,000. The funds are there when you need them. You’re charged interest only on the amount you deduct from your $10,000 credit line.
As you repay the amount you borrowed from your credit line, the amount you pay down is added back into your credit line. Your funds continue to be replenished that way until the end of your term. Use your line of credit for liquor store inventory financing, working capital and more. There are no limits on how you can use your funds. Credit lines are typically available to borrowers with a minimum credit score of at least 560-575.
One small business loan for liquor store owners is the term loan. Apply for a few thousand dollars or several hundred thousand. Term loans can be short-term, intermediate-term or long-term, with repayments ranging from a few months to years depending on the loan type. Payments may occur daily, weekly or monthly depending on your terms.
Short-term loans have less stringent credit score requirements, often between 540-560, with longer business term loans requiring higher minimum credit scores, for instance, 600+. Interest rates vary depending on a number of additional factors, such as loan repayment term, loan amount and lender.
Merchant Cash Advances
A merchant cash advance (MCA) is a same-day funding option offered by many non-bank lenders. Consider an MCA if your credit score is in the 500s and you’ve been in business for less than a year.
How does it work? With a merchant cash advance, you receive a lump sum of capital as an advance on your business’s future sales. To repay your advance and fees, you’ll likely be set up on a daily repayment schedule. Repayment terms can range from a few months to more than a year.
Additionally, instead of an interest rate, your repayment is based on a factor rate, expressed as a decimal figure (e.g., 1.2). To calculate your total repayment, you’d multiply your factor rate by your advance amount.