The best social scene in town doesn’t happen in a bar but in a supermarket. It has become a place for people to socialize—and even fall in love. These grocery stores are in high demand since people are always going to purchase the needed household items and they are becoming a new identity as a social hub in communities. Grocery stores are now the traditional gathering spots with a high tendency toward repeat customers with new offerings and exotic ingredients. If you’re considering opening one of your own, you’re probably looking for some financing options as well.
Getting a small business loan for a grocery store doesn’t have to be a grueling process. If you can predict your needs, comprehend your finances, and know your financing options, you can have the grocery store financing you need to kick start your business. In this guide, we’ll help you with the best financing options available and what type of small business loans will work for your grocery store.
Know the Fundamentals
Even if you’re familiar with the small business loans process, there are still many things you need to understand when applying for grocery store small business loans. Getting financing for your grocery store doesn’t have to be a daunting activity. Once you understand the basis including your business’s finances, credit history, and how you will use the money, the process of getting small business loans for grocery stores will become easier and quicker.
Create A Business Plan
Start with creating a sustainable business plan detailing being it the essential element of your business loan application process. Lenders use this business plan to determine how you’re operating the business, how much money is required to keep it afloat, expected costs, and the long-term plans. Having a sustainable business plan will also help you remain aligned with your strategy, which will help you follow the growth you’ve planned.
Monitor your Cash Flow
Managing your business cash flow is the most vital element of successfully running a business. If you’re making more money than your actual spend, you’re on the right track. This is another element lenders review when making a lending decision. They want to know how successful your business is and how healthy your finances are. Monitoring your cash flow, revenues, and expenses means ensuring the most vital statistics are in order that can affect lender’s approval on your business loan application.
Demonstrating your grocery store as a safe and lucrative investment will put trust in lenders and provide the assurance that their money will be repaid on time. Proper understanding of your financials will not only place a good impression on your creditors but also assist in making the loan approval process quicker and efficient.
Maintain Good Credit Score
Establishing and maintaining a good credit score can increase your odds of getting quick approval on your business loan application. Knowing your personal and business credit score will also get you lower interest rates on your business loan along with the understanding of which lenders are most likely to approve your loan.
You should also know that your personal credit score plays an important role in business loan approvals. Lenders review your personal credit to check your company’s’ credibility and the same goes for any business partners or loan co-signers as well.
Know Your Business History
Your business endeavors are another element every lender wants to know while reviewing your loan application. If you’re in the business for a decent time period and are successful, you’re likely to impress the lenders. A successful record of business accomplishments signals lenders that you’ve been able to maneuver the challenges and decisions that come with managing a grocery store.
This also means if you’re planning to bring in a partner with a successful track record as an entrepreneur, your chances of getting a ‘YES’ on your loan application will amplify—even if you’re a novice without any experience.
Know Your Financials
Knowing your financials is important since not all expenses are the same and so are the small business loans. There are many ways to finance your small business and primarily it depends on your purposes for borrowing money. You should know why you need the money and how you plan to use it. Your lender will ask this one question during the loan approval process.
Knowing your plans for how you will use the money will save you some money in the future. Some business loans provide a lump sum of cash to start big projects, while others help cover the operating expenses.
Small Business Loans for Grocery Stores
Understanding the above metrics will take you closer to getting your loan request approved. The next step is to review every kind of grocery store business loan option that best suited for you.
The most common types of small business loans for grocery stores include SBA loans, lines of credit, term loans, equipment financing, or cash advances depending on what you need. Below is the breakdown of each of these small business loan options to help you get started.
- Small Business Administration (SBA) Loans
Small Business Administration (SBA) Loans are among the best funding option at attractive rates for well-qualified business owners. SBA doesn’t provide the loans itself. Instead, it guarantees the loan payment made by the network lender to approve and disburse the payments. Since the cash is guaranteed, lenders offer affordable interest rates, larger amounts, and flexible repayment terms to small businesses.
There are different kinds of SBA loans and each has its own terms and criteria to oblige small business objectives. The loan program includes basic 7(a) SBA loans / SBA advantage loan, CDC / SBA 504 loans, SBA Caplines program, SBA export loans, SBA microloan program, and SBA disaster loans.
- Lines of Credit
A business line of credit is similar to a business credit card in many respects. In a line of credit, you get a set amount of money, and can use that cash partly or in full as you like until the end of the loan term. The rate of interest and spending limit are the only differences between a credit line and a credit card. A line of credit carry lower interest rate with high spending limit while a credit card typically comes with high-interest rates and low spending limits.
- Term Loans
Many banks and alternative lenders provide and term loans for grocery stores and supermarkets at affordable rates with longer repayment terms to ensure a flexible repayment plan of all the business debt-funding options. Term loans can be easily availed if you have a good credit history because lenders are reluctant to take the risk involved. The interest rates for a term loan ranges from 5-10% with terms up to 25 years.
- Equipment Financing
Products in high demand and expensive equipment’s are the main financial obstacle for most grocery stores. Financing these products and equipment can help! If you’re unwilling to lease case stackers, merchandise racks, walk-in freezers, or any other grocery store equipment, then equipment financing can be the best solution for you. With equipment financing, you don’t have to provide any collateral. Since the equipment is purchased by the bank, you don’t have to put up any money upfront helping your improved cash flow and liquidity. The bank can hold the equipment in the event of non-payment.
- Cash Advances
Cash advances also provide grocery stores fast access to funding without much paperwork required. In a cash advance, lenders provide an advanced lump sum of cash in return of future grocery store bank or credit card deposits. The cash advance lender draws a fixed percentage from the Debit/Credit deposits daily until the agreed total amount is paid off. The factor rate for a cash advance ranges from 1.15 to 1.55 with repayment terms from 4 to 24 months.
- Your Business Plan
- Credit Report
- Tax Returns
- Financial Statements
- Bank Statements
- Documentation of Collateral
- Social Security Number
Uses of Loans for Grocery Stores
Grocery stores can use small business loans for many different purposes, including:
- Working capital
- Pay suppliers and/or vendors
- Hire workforce
- Pay taxes
The Bottom Line: Invest in Your Grocery Store’s Future
Starting a business is both challenging and enticing at the same time. Starting a grocery store isn’t the leisurely walk, but a crucial staple within any comfortable neighborhood. I believe you’ve surely got some grocery store financing options if you’re interested in opening a grocery store.
At Merchant Advisor, we offer small business loans to grocery stores in order to help them keep their shelves stocked. Unlike banks, we don’t require collateral or into account your bad credit history. We provide business capital, credit resources, affordable prices, renewal benefits, and early repayments and most importantly, peace of mind!