How leveraging a business loan could benefit your retail business – Part 2
1. Growing your business through acquisition
If you want to expand your business beyond what you can achieve through organic growth, you may be on the lookout for acquisition prospects.
Before you can act on an opportunity to buy out a competitor, or to expand vertically by acquiring a supplier or customer, you need to know you have the financial capacity.
There’s a lot involved in an acquisition, including valuations, negotiations and complex due diligence which can consume all your attention. Having your finance organised in advance will enable you to identify affordable targets, show the vendor that you are a serious buyer, and speed up and streamline the purchase process.
2. Refurbishing your premises
With increasing competition from global retailers – including online giant Amazon – Australian retail businesses need to work harder than ever to keep customers coming through the door.
Changing the appearance or layout of your store – or merely keeping up with rapidly evolving technology like mobile wallets – can be a costly business.
Quality fittings and state of the art technology may be well beyond the capacity of your working capital, and a bank business loan is likely to be more cost-effective than fit-out or short-term equipment finance.
3. Going multi-channel
Online retail is now a $22bn market in Australia, with growth in online sales by small retailers outpacing corporates.
88 per cent of Australians now own a mobile phone, and mobile payment solutions are making it easier and easier for people to shop online. As a result, online purchases have increased 25 per cent in the last two years.
If you are planning to take advantage of this lucrative market and expand your business into new channels, the up-front costs can quickly add up. You may need a business loan to bridge the gap until you start generating extra sales, and cover expenses such as:
- design and hosting of a mobile-optimised website
- integrated e-commerce system
- professional advice – legal, financial and technical.
4. Building your brand
These days, the key to successful branding is an integrated customer experience, both on and offline.
If building your brand is an important part of your business strategy, it’s important to keep up with new trends in customer expectations. This may mean both up front and ongoing investment in digital; content marketing, social media engagement and analytical tools – and perhaps the support of skilled consultants to help keep you on track.
Marketing – through both traditional and online channels – should of course pay for itself in the long run. But it can take a while to grow your reputation and build a loyal customer base.
A business loan could give you the capital you need to devise and implement a successful marketing strategy.
How to apply for your retail business loan
If you are considering taking out a loan for your retail business, you’ll need to show potential lenders that you meet their criteria.
Expect them to look at your:
Business lenders will still want to see each shareholders personal credit score. Even if your credit rating is low, you may still be able to access finance. There are lenders who specialise in offering loans to businesses with a lower credit score, although they are likely to charge higher rates to compensate for the increased risk.
Most lenders won’t take a chance on a start-up retail business, so you’ll need bank statements or financial records to show that you’ve been trading for at least six months.
Above all, lenders need to know you can afford to make repayments. If your business is seasonal you may be able to structure repayments around your cashflow, as long as you show you make enough profits to service the loan.
Applying for an unsecured business loan is usually a straightforward process – most lenders have an online application form, where you can upload your supporting documents and get an answer on the spot.
Be sure to shop around before applying for a loan of any kind. You’ll need to compare not just interest rates, but also all the other charges and fees that may be attached to the loan. Terms and conditions can vary widely too, as fintech (non-bank) lenders are not subject to the same regulations as banks.
It’s always a good idea to seek professional financial advice on whether any debt product is right for your business, and which finance product will best suit your needs and circumstances.
Brought to you by Shaun McGowan, Co-Founder, Lend Capital
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