The holiday season is approaching fast, which means that retail business owners need capital for inventory purchases which will let them maximize their cash flow. But how hard is it to get a business loan for a retail shop?

Various factors affect the type of loan you can qualify for and whether you should submit loan applications to financial institutions or alternative lenders. Some of the most important factors include your personal credit score and credit history, annual revenue, years in business, and business plan. Beyond determining whether your loan application is approved or not, these factors can also change your interest rates.

But there is no reason to get overwhelmed. Most business owners can qualify for some type of small business loan. You just need to figure out which type of loan fits your needs and qualifications. Let’s take a look at what small business loans can do for your business, what you need to get a business loan, and which type of loan will work best for your business.

Why Retail Businesses Need Small Business Loans

Retail businesses run on working capital. Business owners have to invest in inventory to meet future demand and generate cash flow. Without capital, it’s very hard to start a business in retail or increase annual revenue. Once you have cash flow, you can use it to purchase revenue and create a self-sustaining business plan.

But even established retail businesses often need bank loans or small business loans to increase inventory ahead of busy seasons. Business owners need these loans more than ever when it comes time to prepare for the holidays. The end of summer often brings a slump in business, which reduces cash flow and available capital to pay for new inventory. Yet many retail small business owners make most of their annual revenue during the holiday season thanks to the increased demand from customers. Small business loans give business owners the capital they need to stock up and take full advantage of the holidays.

Small Business Loan Application Requirements

How hard is it to get a business loan for a retail shop? The main factor is the type of loan you need, and which business lenders accept loan applications for that type of loan. To qualify for a bank loan you need to submit loan applications to financial institutions, which have higher thresholds and often require in-depth paperwork including a comprehensive business plan. But alternative lenders offer more types of loans for small business owners with lower requirements.

You can get loans guaranteed by the Small Business Administration to purchase fixed assets such as your retail space, warehousing machinery, and POS devices. You may have to pay more for an SBA loan depending on your time in business, so it is more expensive to use SBA loans to start a business. But small business administration loans can be useful for retail business owners looking to expand their holdings. They tend to have extremely high requirements to approve loan applications though so may not be an option for many small business owners.

But you can’t use SBA loans to pay for non-fixed assets like inventory for the holiday season. So you’ll need a bank loan or small business loan from an alternative lender. As we’ve mentioned, it’s easier and faster to get a loan from an alternative lender. But except for a business plan, an alternative lender and a traditional financial institution will look for the same things in your loan application:

• Credit History
• Personal Credit Score
• Cash Flow
• Time in Business
• Annual Revenue
• Assets

Which Type of Loan is Best Small Business Owners?

It’s easier to get a small business loan from an alternative lender than it is to get a bank loan from a financial institution. But the type of loan also has a significant impact on the answer to how hard is it to get a business loan. Two types of loans offered by alternative lenders are particularly well suited to meet the short-term capital needs of retail businesses: business line of credit and business cash advance. Each has its advantages and will be better suited for different business owners. And each will have different requirements for loan applications, meaning that your credit history, assets, and annual revenue may determine which type of loan is best for you.

Business Line of Credit

A business line of credit is an extremely useful type of loan for small business owners ahead of the busy holiday season. That’s because it creates a large cash reserve which you can draw upon as needed to purchase inventory, but you only have to pay interest rates on the portion of the line of credit that you use. So it functions as a funding insurance policy which enables you to buy inventory as needed without worrying about paying back a lump-sum bank loan.

Taking out a business line of credit is a great option for so many small business owners. The requirements to get your loan application approved for a business line of credit can be higher than another type of loan, such as a merchant cash advance. To receive a business line of credit from leading alternative lenders you may need to have been in business for at least 6 months, have at least $20,000 monthly revenue, and have a personal credit score of 620 or higher. If you do meet these criteria, getting a business line of credit can be an excellent option and you can get approved within a day after submitting a loan application online.

Business Cash Advance

Merchant cash advance financing is an excellent type of loan for small business owners to prepare their retail business to handle increased demand over the holidays. Without a small business loan, retail business owners need to purchase inventory using their current revenue. A merchant cash advance allows retail companies to buy inventory using their future revenue instead. Which makes a merchant cash advance the perfect way to get ready for a high-revenue season.

Here’s how it works: You receive a lump-sum payment from the alternative lender and give the lender a cut of your revenue until you have paid back the loan. The amount you pay out of your revenue is called the holdback rate and is generally $0.12 – $0.45 on the dollar. And you don’t have to worry about accruing interest over time. You agree upon the fixed payback rate, which is between 20% and 30% when taking out the loan. So on a merchant cash advance of $10,000 with a 10% holdback rate and 20% payback rate, you would give the lender 10% of your revenue until you had paid them $12,000. Merchant cash advance financing is simple and easy to plan around.

How hard is it to get a merchant cash advance business loans? It’s often much easier than other types of financial instruments because you pay the small business loan back using your revenue so the credit history requirements are lower. You just need to have been in operation for at least 6 months, have $10,000 or more in monthly revenue, and have a personal credit score of 500 or higher to have your online loan application approved.