Opening any kind of business takes a lot of hard work and funding and in this day and age, there is even more risk when it comes to opening a retail store. However, if you are determined to fulfil your dream and put in plenty of planning and hard work then you can find yourself running a successful business if you can get the funding to start up your business.
A study conducted in 2015 saw that retail and food services accumulated $5.35 trillian in total sales across the US but with the COVID-19 pandemic, there is more risk in opening up businesses.
That being said, if you have the drive and ambition, then there are plenty of funding opportunities and options available that you should consider. In this guide, we’ll be taking you through these options so you can determine which one is the best fit for you:
Options Available for Opening Your Retail Store
As mentioned above, there are numerous options available to fund your retail store. There is no right or wrong answer and every person is different and will have different assets available to them. The options available are: self funding, conventional loans and SBA 7(a) loans. Here, we’ll delve into each one and explore the advantages and disadvantages:
The first option that should be considered is self funding. A lot of small business owners find that they have to fund a certain amount of their total funds themself if not all of it. This is because it can be difficult to get an initial loan to start up due to the amount of risk.
Some people will choose self funding because it means that you don’t have to worry about going through the loan application process and means that you don’t have to worry about repaying.
However, there are clear risks which come with self funding with the main disadvantage being that you are putting your own money at risk meaning that there is a possibility that you can lose your own money with no backup. Another disadvantage is that you are limited with how much you have as you will have to budget everything up perfectly as there won’t be any leeway.
The more money you put into your business, the higher the risk should the business become defunct. This means that your money will have the same fate as your business which makes it an option for those who can afford the loss.
In order to successfully self fund your business, you will have to accumulate anything you have for extra capital should you need it. This could be anything including cars, extra houses or boats. This does mean that self funding is a pretty exclusive option for those who have a lot of money to begin with and may not be viable to those who have a lower income or low amount of savings.
For those who don’t have self funding as an option, there are other options available with the first choice being conventional loans.
A conventional loan is a loan that is taken out from a bank or lending firm. These loans are not catered to small businesses specifically meaning that it can be more difficult to get the loan in the first place. Therefore, it’s important to make sure that you have prepared your application thoroughly including your business plan, financial projections that predict future growth and earnings.
Bringing any financial records that you have will also benefit you as well as ensuring that you have a suitable credit score so the lender can be assured that you will be paying back the money on time. This means that you’re ensuring them that they have proof that you are more than capable of presenting a solid financial plan that will be profitable and allow you to pay off your debts.
SBA 7(a) Loan
The last option that any aspiring retail store owner should consider is the SBA 7(a) Loan which is the most popular choice among small business owners.
This is because this loan program has been designed with small businesses in mind and can cover everything that goes into setting up your business from the commercial real estate to any equipment or furniture that you need for your store.
SBA 7(a) Loans can be taken from a variety of lenders across the country including, banks, credit unions and other lending institutions. The eligibility criteria is also straightforward and can be catered towards your business needs.
With no minimum loan amount set and a maximum of $5 million, you can choose an amount that is appropriate for your business whilst also ensuring that you are able to pay it back in mind.
The reason why there isn’t a specific loan amount set is because small businesses can range in terms of what they need whether it is a restaurant or a retail store. Therefore, knowing how much you need to take out will give you a better understanding of what to expect from your business.
When it comes to thinking about what you will need to buy for your retail store, there are certain things that are essential to ensure that you have the basics covered when you get your loan. Having a location sorted out is important for your retail store and whether you are renting or buying, the SBA 7(a) loan can contribute towards your costs.
Also, making sure you have plenty of equipment and regular supplies is a hugely important aspect of your business so having quotes from suppliers before you complete your application will also be great as you can incorporate it into your business plan.