Retailers can secure funding for both expansion and inventory, with different loan options being more suitable depending on your plans for growth. Regardless of the size of your operation, you will find that if you are intending to expand your business by acquiring new premises or land, your primary options will be long term secured loan options, often in the form of mortgages secured against either the property or grounds.

Funding for inventory has many more viable options, from short term loans to stock up, or a revenue based facility where you can access ongoing funds to help smooth out your business’s cash flow without affecting your daily operations. Both of these options are of course available here at Nucleus, however as we have covered the more niche loan options for retailers in the previous FAQ, below we’ll go more in depth on what retailers need to consider when it comes to securing funds for either their expansion or for inventory.

Your Eligibility Requirements:

You will find that there are many common requirements across all lenders when it comes to applying for a business loan, so beyond those shared requirements, which we will touch on below, we cannot speak for other lenders, but we can cover the criteria we have here at Nucleus to give some examples of what to expect.

All lenders will initially want to see proof of both your ID and the legitimacy of your business before an application is made. If you qualify to apply, your prospective lender at a minimum will want to know your credit history and see copies of your past 3 – 6 months financial statements, and these will provide them with an idea of how much risk you present as a borrower. The criteria for our term loans for example are as follows:

• Trading history: To access our term loans we require that your business has been trading for a minimum of 12 months, and this is pretty standard across most lenders.
• Credit score: As mentioned, a good credit score is preferred, though at Nucleus we take each business on its own merit, and prefer to consider a larger number of factors than just a number.
• Financial documentation: We require statements of your balance sheets, cash flow, and profit and loss (P&L), as they will help us determine how healthy your business is, and what we can responsibly fund you with as a lender without putting your business under financial strain.
• Directors: To be eligible for an application with us at least one of your directors must be based in the UK.
• Open Banking and Open Accounting access: We use financial technology for our loan applications, whereby, with your permission, our systems can view your bank accounts and check to see if you are eligible for a loan within minutes.

Regardless of whether you are looking to access funding for expansion or inventory, being able to transparently show us or any other prospective lender that your business is licensed and is healthy financially will go a long way towards making your application successful, supplying you with the finances you need to grow.

The Correct Loan Type for Your Needs:

Some loan choices may seem obvious, however it is still important to do your due diligence on loan types, and speak to your financial advisor to be sure you are getting the right facility to best suit your business’s needs. In many cases it can result in a large financial difference between what you pay back to your lender overall, but also ensures that those funds are used for the right intention without them falling short of your requirements.

• Loans for expansion: Unless an expanding business already has its own lump sums of capital that it intends to use as a deposit, then you should expect an expansion to require a long term loan, often in the form of a commercial mortgage or a development loan, whereby you can access large sums of cash with good rates. Although we only offer term loans up to 6 years here at nucleus, other lenders who offer longer terms should still allow the borrower to use those funds for almost any business purpose, and with regards to expansion, that could include developing an existing property too. If it is your intention to apply for a larger expansion loan, be sure to research lenders who specialise in land and property mortgages to find the best rates.
• Loans for inventory: Inventory options are much more varied, and as covered in the prior FAQ, may include anything from inventory financing, to lines of credit and merchant cash advances, all of which are designed to help retailers when they need to purchase stock and want to avoid straining their cash flow, which of course can have a knock of effect of disrupting their operations. Once again, we advise that you speak to your financial advisor, as they should have knowledge of niche lenders who specialise in inventory loans, however if you are looking for a facility to help with simple bulk purchases or other general purposes, short term business loans like those we offer at Nucleus may be just as suitable.

Improving Your Application Chances:

If you are a new business, from the start of your venture there are many things you can do to set yourself up for future successful loan applications. To start with, always aim to maintain a good credit score, which in the UK ranges from 0 – 100. A range of 80 – 100 is positive and is classed as ‘minimal risk’ for lenders, all you need to do is ensure you keep up to date with any outgoing payments, whether that is credit card usage or any other finance. Ensure your finances are also well accounted for, whether that is through ledgers or financial technology that keeps a log of your financial history. The more transparent you are with your prospective lender the more you can earn their trust when it comes time to produce your financial records.

For businesses of any age, you can also draw up a thorough business plan with your intended uses of the loan you’re looking to secure, as well as demonstrate your strategy to repay and achieve growth with those funds. Depending on the lender, more or less stress may be put on a business plan, however it can still be useful for you as a reference point to ensure you continue to use the loan as you initially intended. With all documents, whether that is personal or financial, ensure you have copies of them, and also keep them up to date and as accurate as possible as this will help speed up your application process.

Finding and securing the right funding for your retail business can be an important step towards achieving the success you seek, whether that is through the excitement of expanding your brand, or maintaining its ongoing operations through inventory finance. Once you understand your needs, ensure you prepare yourself diligently and gather all the correct documents that your prospective lender requests to make certain that your loan application has all the best chances of succeeding.

There are many things that will need considering when it comes time for your business to take out a commercial loan, with the highest priority being that you choose the right type of loan for your needs. When you are certain, you should then go on to explore lenders and their terms and conditions, as this can mean a large difference in the overall debt you will need to pay back.

If you are taking on considerable debt for something like an expansion project, these choices become especially important, because if you are going to lock yourself into a 30 year commercial mortgage you’ll want to be sure you’re getting the best loan rates. Although we advise first that you speak to your financial advisor or accountant before taking any steps towards securing a loan, below we’ll cover some of the things we regard as key considerations for any business owners who want to get a better idea of what to expect when it comes to choosing commercial finance.

What Are Your Business Needs?

As touched on above, the most important thing you can do when taking on debt is to ensure that it suits your needs, and to know what facility will do that, you need to know exactly what it is for.

• Expansion: If you are planning to expand your brand things are quite straightforward, as you can apply for a commercial mortgage if it is a new property or the large scale renovation of an existing one. If your expansion plans include smaller renovation jobs such as adding a storeroom to your establishment, a shorter term business loan may be more suitable.
• Inventory: The easiest solution for keeping your inventory stocked is some form of rolling credit, and there are many niche options available, from specific inventory financing solutions to a business line of credit, where you can access a steady source of income and repay it as you use it.
• Cash Flow: For some retailers who deal around seasonal trading periods, cash flow may need smoothing out over the course of a year, and there are options to resolve this such as the revenue based funding that we offer at Nucleus, whereby you can borrow a lump sum, and that money is then repaid based on your sales projections, so during slow months you’ll pay less, and when business picks up pay more.
• Operational: Both inventory and cash flow are relevant to your daily operations being successful, however in some cases if you need to cover payroll, or hire new staff over a seasonal period, a short term loan can also be utilised to ensure your regular cash flow is not put under strain while you continue to grow.

You should also consider whether your financial needs will be long term or short term, as this can also affect your loan rates, with shorter term loans tending to have higher interest rates due to the larger risk that lenders must commit to them. Consider all these things strongly, and do your due diligence on options, as in the long term the right choice will pay off.

Loan Costs and Interest Rates:

Many loan options are advertised with great introductory rates, and can lead you into a commitment that may not be in your business’s best interests in the long term, and these are also worth taking the time to think about and understand. The cost of borrowing can go up significantly across the course of a term, so ensuring that you get the best deal from the off will save you a lot of financial stress.

The primary cause of loans becoming unaffordable is the interest rates attached to them, and while long term mortgages tend to have the best rates on the market, you may still end up struggling if your rates change. Let’s take a look at how they might:

• Fixed interest rates: Some lenders will offer commercial mortgages with fixed interest rates for up to 15 years, however if the rates are high, that may not be a good idea. In many cases, borrowers will take a 2 year fixed rate, which prior to the pandemic was as low as 1% in some cases. When your 2 year fixed rate ends, your mortgage will default to the lender’s base rate, which at the moment for most high street banks is around 5%. At that point you can either shop around for a new fixed rate or continue paying at a higher rate. If the economy is in great shape, it can be a good idea to take on as long a fixed rate as possible, although this is certainly something you should discuss with your financial advisor first.
• Variable interest rates: Variable rates on the other hand will rise and fall on the whim of the economy, as your lender will feel more or less comfortable with the rates it offers, and will be reflected by the Bank of England’s decided base rate.

There are also other additional costs you should consider before committing yourself, and it is why due diligence is so important and querying your prospective lender as much as possible before signing a contract. Some lenders may have hidden fees or steep penalties should any unforeseen circumstances result in you struggling to repay your facility, and it is why you should take every piece of criteria into account when calculating the total cost of your spending.

The Repayment Terms:

Between different lenders and different loan types you will find that repayment terms can vary widely, and it is another thing that you should take the time to understand before committing yourself to a loan. Most mortgage lenders will expect monthly repayments, and so will most term loan lenders, however some financial options are different. With our revenue based loans at Nucleus for example, we request weekly repayments, and this is because of how the loan works, being based on your fluctuating cash flow.

There are also important things like whether the loan is secured or unsecured to consider, as loan options such as equipment financing will have a deadline where you will need to decide whether you are going to make a final payment to purchase that equipment, or whether you will need to seek a new loan option to continue your operation unhindered. For unsecured loans, you will find that they have higher interest rates due to the higher risk to the lender, and this is something else that you’ll need to add to your cost of spending calculations.

The Lender:

Choosing the right lender for you will be just as important as the loan they offer. In most cases, your financial advisor will be able to syphon through both lenders and their loan terms, finding the best interest rates and criteria, as well the facility that suits your needs. If you are going to look for a lender without help however, be sure to research their brand and trading history, and never commit to anything you are unsure of. Find a lender who is transparent and makes plenty of time for you through their customer support lines, and that way you should be able to avoid any unwanted surprises.

There are many things to consider when it comes to choosing the right finance for your retail business, and unfortunately for most first time borrowers, the entire process can be extremely daunting. Finding expert help and advice will go a long way to ensuring you find the best solution, and also doing your due diligence to ensure your lender is professional and trusted will keep you on track to success.

For retailers, you can expect a standard qualification process for commercial finance solutions or any other loan option. Your lender will expect to see your credit history and recent financial documents, and in some cases you may be required to present a business plan to demonstrate how you intend to use and repay your facility.

If you are a retailer and you are considering commercial finance, below we’ll expand on each of the most relevant qualification points that you will come across when you make your loan application with the aim of giving you a basic explanation of the entire process.

Credit Rating:

A business’s credit score and history is important across all industries, and for retailers, depending on their business’s size and structure, for example if you are set up as a sole proprietor or a corporation, you may also need to provide your personal credit score.

• Business credit score: If you are an established business your prospective lender will likely only be worried about your business credit score, and that will range between 0 – 100. The higher your score is the lower you are considered a risk, and it also means you will have access to the best loan terms.
• Personal credit score: Personal credit ranges from 0 – 1000, and once again, higher scores mean lower risk to the lender.

Regardless of whether it is for business or personal, credit scores can be improved and maintained by paying your bills on time, and that can be any form of credit or finance. It demonstrates to us lenders that you can manage credit and debt responsibly, though it still isn’t the be all and end all of a loan application, it just means your rates will likely suffer as a result of poor credit history.

Financial Documents:

Presenting your prospective lender with a transparent view of your business’s financial health will be an important step towards securing a commercial finance solution, and alongside 3 to 6 months of your business account statements, you should also expect to produce copies of your profit and loss statements, your cash flow statements, and your balance sheets. Ensure they are accurate and up to date, though if you use financial technology to record your finances this will be less of a worry. Have them on hand in both digital or printed format, ready for your lender, to ensure there are no delays in your application.

Trading History and Experience:

Most lenders will require you to have been in business for a set minimum of time, for example at Nucleus we require that your business has been trading for at least 12 months before we will consider granting access to our loan options. Some may expect a longer or shorter trading history, though in the cases of a startup loan, this of course will not apply.

With a longer trading history you can easily demonstrate to prospective lenders that your business has survived prior economic turns and market changes, and that your operation will continue to perform in the long term. This isn’t possible for newer businesses and in most cases will increase how much risk is associated with you. If you are a smaller operator, applying for smaller loans and short term finance in your earlier years can be a great way to build up your credit rating and demonstrate to lenders that you are capable of repayments and are a responsible borrower.

Although it is less important, demonstrating that you have long term experience in the industry may also help build trust with your lender and improve your terms, however your finances are more likely to reflect how much risk you present over this.

Collateral and Security:

If your loan is secured, it will need to be secured against some collateral, and this is what lenders regard as the security against the funds they are lending. In the case of a mortgage, the collateral will be your newly acquired property or land, however for a smaller facility option like equipment financing, it will be the equipment that the funds are secured against. If a scenario occurs where you then fail to make the repayments on your property or equipment, the lender is within their rights to repossess the collateral as a means of avoiding losses.

Business Plan:

If it is required, your business plan should outline the goals you hope to achieve with your commercial finance solution, both financially and practically, and also how your growth will be achieved within your market. All of these things will demonstrate to your lender that you understand your sector and that you’ve done your due diligence on the loan’s impact on your business. Being thorough, and having a clear pathway laid out in your plan also means you can use it as a reference point in the future to ensure you are staying true to your initial intentions with the facility.

As with most other financial solutions, commercial finance for retailers requires you to meet a number of standard criteria and, in some cases, more specific ones, such as the need to present your own credit history as well as your businesses if you are a sole proprietor and fresh in the market. You can prepare yourself in advance by first speaking to your financial advisor or accountant, and getting to grips with what the lender of your choice’s specific requirements. A well-utilised loan can be an extremely powerful tool in expanding your business and achieving long-term success, so ensure you are well-equipped before you commit.

Both commercial finance and traditional loans are viable options for retail businesses who are looking to expand and grow, however in many cases, commercial finance options tend to have more flexibility compared to approaching high street banks for your funding.

If you are a retailer who is weighing up their options with regards to securing a loan, the options can be quite daunting, but with some research and taking the time to speak to your accountant or financial advisor, it shouldn’t take long to find what is best for your business. Below we’ll explore why, depending on your situation, commercial finance might be the better option for you over traditional loans.

Access to Capital for Seasonal Inventory:

Many retailers operate around seasonal sales periods, with goods like holiday products for christmas or summertime breaks, and find themselves needing to access funds to fill up their stock during those high demand periods. In cases like this, due to the time it takes for traditional banks to process loan applications, alternative lenders who offer commercial products will be more suitable. Traditional banks often take weeks of back and forth between themselves and their prospective customers which would lead to missed opportunities for seasonal sellers, however with options like revenue based business loans, you can access faster funding to meet your customer’s demands.

Repayments Based on Your Performance:

If you are the kind of retailer that experienced fluctuating cash flow, you will also find that traditional loans have a repayment structure that is unfavourable to your operation, in that continuous monthly payments of a set amount simply cannot be met, even if you perform well overall across a year. Revenue based loans, especially those offered by us at Nucleus, are flexible in that they can be paid back weekly, and you only need to repay an amount based on your performance. This means during slow periods you aren’t put under the kind of financial pressure that you would be with traditional finance.

Different Entry Barriers:

In almost all industries, the entry barrier to obtain a traditional loan can be high, and is often very dependent on your credit score and financial history. You may also be lacking assets if your business is newer, which can be a turn off for traditional lenders. Alternative lenders like us at Nucleus offer unsecured commercial business loans with competitive rates and will look deeper into your business than just your credit history, with the aim of ensuring you can access a financial package that is affordable for you.

Facilities that Meet Your Needs:

Between operations, expanding, balancing your cash flow and ensuring your daily operations run smoothly, retailers have a number of demands that need meeting, and through the varied range of commercial loan options out there, it is possible to find a solution to almost any retail problem. Because traditional loans are typically fixed however, it is unlikely that a more niche need such as inventory financing can be sought through them, and due to that, you may need to seek out alternative lenders like us at Nucleus who are more flexible and can better meet your needs.

Higher Approval Rates:

If you are a retailer with a shorter trading history or less than perfect credit rating you may struggle to secure the funding you need from a traditional bank, where credit score thresholds are higher, and they are less likely to look at your business and the individuals running on a case by case basis. It means there is generally a barrier for newer businesses to access traditional financing, whereas commercial lenders will look more into your current sales performances and potential for growth, instead of just considering your credit numbers.

In all, commercial finance for retail businesses offer a wider range of options, and you are more likely to secure the funding you need for your niche issue compared to when approaching a traditional lender. It is also worth reiterating the importance of speaking to your financial advisor before you approach any lender for a loan, as they will be able to guide you acquiring the funding with the best rates, helping to ensure your business continues to grow and thrive in the competitive retail market.