Podcast recorded in November 2023

Ben Larkins and Jon Maloney explain everything we need to know about retail business loans.

What is a retail business loan and how do they work?

It’s a loan taken out by a retail business. It could be for a high street shop, an online business or a dropshipper company – any type of e-commerce.

Primarily we find that most businesses wanting a retail loan use it to buy stock, especially when coming up to Christmas.

What are the eligibility requirements for a retail business loan?

We require a turnover of £72,000 plus, for a business typically trading for longer than 12 months. However, with retail there’s a number of different products we can get. If you’ve been trading for six months we might be able to get you something.

We really need a set of year-end accounts to look properly at your options.

What documentation is typically required when applying for a retail business loan?

We’d need your year-end accounts for the most recent period, and typically three months’ business bank statements. Sometimes we may need six months’ statements with retail because it’s very seasonal.

Shops, e-commerce and online retail businesses are often very seasonal, so the underwriters like to spot trends on the bank statements. Six months of records is often better to get you to get you exactly what you need.

Are there any industry specific considerations or requirements when applying for a retail business loan?

Not especially, but sometimes we’ve encountered issues with online retailers who sell through sites like Amazon. They don’t obviously have a dedicated website, but as long as you can provide a link as to where you sell their products, that will work.

It’s all about evidencing the affordability, and that you are a proper, trading business. We couldn’t do finance for Del Boy who sells hooky dolls out of a suitcase! We can’t prove what he does. We need evidence that it’s a proper trading business with a display of what you sell.

I would just add that a business bank account is essential. A lot of retail businesses we see originally started as a side business. Perhaps the founder had a 9-to-5 job but wanted to earn a little bit more money. Then this side job starts earning quite a lot and they carry on trading.

If the business is still operating via a personal bank account, that won’t work. We need a business bank account to evidence that it’s a bona fide business with clear profits. We can only get loans for actual businesses, rather than people who have a job and sell a pairs of Travis Scott Nike trainers on a Saturday.

That’s a very niche reference – but I’ve got 16 and 15 year olds. I must admit one pair is quite nice.

Can individuals or only businesses apply for a retail business loan?

In short, it’s only for businesses.

What are the typical interest rates associated with retail business loans?

It’s really on a case by case basis. There are a lot of factors that affect interest rate – time trading, turnover, credit worthiness and things like that. If you’re looking for a typical interest rate, get in touch with us. Get some bank statements and accounts over and very quickly we will be able to give you a good idea of what the interest rate is going to be.

What are the repayment terms and options for a retail business loan?

The terms are from six months to five years. We can potentially look at weekly or daily payments if it suits the business’ cash flow better. As a general rule of thumb, though, it’s monthly.

One for another podcast, potentially, rather than opening a big can of worms, is an MCA. That’s a merchant cash advance, where basically you can get money on the back of your PDQ machine sales. They take a percentage every day from your card machine – but I won’t go into too much detail because that’s probably a podcast in itself.

Is it possible to pay off a retail business loan early without incurring penalties or additional fees?

Yes. Again, it’s funder dependent. Some of our funders will do interest up to the point of settlement, some will charge you two or three months’ interest, some will charge you 10% to 20%… that will all be explained when you get approved and you want to go ahead.

The early settlement terms are explained on your loan document and our account managers will let you know about that, as well.

Can I still get a retail business loan if I have bad credit?

Yes, you can – it’s just dependent on how bad your credit is. If you haven’t paid your mortgage in six months, you haven’t kept up other business loan commitments or paid the gas or electric bills for your office unit or warehouse, you’re probably not going to get one.

But if there’s a couple of blips here and there, we understand that – that’s what business is like, things happen. Funders look at your crucial payments in a business. They see if your rent is being paid, are your suppliers being paid, is your gas and electricity up to date? These are the crucial things you need to run your business.

If they aren’t being paid, an underwriter is probably not going to be confident that you will repay the loan. That’s a key thing to consider as well.

How can I improve my chances of getting a retail business loan?

Don’t apply too late. If you know you’ve got a bill due in three or four weeks and your cash flow means you will struggle to pay it, be proactive. Don’t wait until there’s a big bounced payment on your bank statement or somebody’s trying to sue you and get a CCJ against you.

Apply when you’re in a position of strength rather than weakness. As we touched on earlier, it does affect the interest rate, because you will be deemed a higher risk.

While you’re running a business, try to have a tiny bit of foresight that something coming down the line might be a struggle. All businesses struggle at times. Every business hits a period where the director is dreading going into the office in the morning to open the post and find bills that they can’t pay. Every business owner has experienced that sort of thing. We’re completely sympathetic to the plights of people running a business.

How can I apply for a retail business loan?

Go onto our website and there is an Apply Now button. Simply click on that and fill out a form. It will take about two minutes and you will have contact via email and a phone call from one of our dedicated account managers within five minutes.

The majority of what we do is working capital and cash flow finance. So you can’t be waiting 48 hours for a callback. You need a call and a resolution to your problem now, not in two days. That’s why we encourage our guys to talk to you as soon as they can, because people need us.

Do you have any case studies or examples where you’ve helped clients secure a retail loan?

We’re very adept at dealing with retail businesses. All the guys have lots of experience in these, especially when the shops are gearing up to buy a load of stock for Christmas.

We’re in November now and we are doing a lot of stock loans and cash flow loans because clients need some money to get through the Christmas period, and get stock on the other end. We deal with lots of different things, but we are well versed in dealing with a retail business.