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How to Finance a New Retail Location with a Business Loan

Posted by Bond Street on Jun 8, 2017
Bond Street

Your retail business has been so successful that you’re considering opening a new location—congratulations! This is an exciting moment for a small business owner, but some of the thrill can dissolve with the prospect of finding the cash to get this next venture off the ground. Fear not! There are fast and simple debt financing options available to you so that you can focus on what matters most—your business.Still not quite sure it’s time to make the leap to an additional location? There are a few key indicators that the move makes sense. If the following sounds like your business, the time is probably right to scale up.

You’ve observed sustained demand:  Sales are strong and sustained. You’ve observed them over the course of the seasonal cycles and are confident that you aren’t just observing a temporary spike.

You’re able to delegate:  Adding a new location means you’ll probably need additional hands on deck. Assess if you have a staff you trust who you know will be there to help you build and grow.

You have the infrastructure in place to support the move:  Consider if your business were to double tomorrow – do you have the systems in place to keep up? From staff to storage space, a new location requires scaling up in ways you may not have considered yet. Ensuring you have the infrastructure in place to support the frenzy of activity that accompanies a new storefront will help you to make a smooth transition.

You understand your customers:  You’re in touch with your customer base, understand your key demographic, and are confident a new location will allow you to reach more of them.

Your business is performing according to plan:  You’ve been able to meet your goals thus far, and your business has been performing roughly according to your projections. A new location means fresh complexities to add to your business plan – but you’re up for the challenge.

You have sufficient funding:  Even with great profits, it can be challenging to carve the cash out of your budget to fund a new location without disrupting your current business. This is where a loan can help.

When United by Blue, beloved by its customers in Philadelphia, was presented with the opportunity to snap up an incredible location on the Jersey Shore, owner Brian Linton didn’t want to hesitate. He worried, though, about how to find the money to invest in the new location—in addition to purchasing inventory for the upcoming holiday season. Brian Linton turned to a term loan to fill the gap.

Term loans are one of the most common types of financing for small businesses. They’re appealing to business owners for a few reasons – they come in a range of shapes and sizes and are therefore flexible to a range of business needs, can be approved quickly, tend to have relatively low interest rates, and are easy to budget for due to their simple and predictable repayment plans. Term loans tend to be a great choice for businesses at the stage where they’re ready to expand to a new location, because they’re best for those with an established operating history that are making a long-term investment expected to generate growth.

As most retail businesses rely heavily on credit and debit card sales, another option to consider is a merchant cash advance – it’s a payment you receive as an advance against your future sales. This form of financing is good for retail businesses that may have weaker credit history, who don’t qualify for a competitively priced term loan, and who don’t mind the unpredictability of loan repayment as a portion of sales rather than in fixed quantities over time. However, it’s important to note that a merchant cash advance can often be the most expensive borrowing option.

If your concern with opening a new location is primarily oriented around the cost of stocking up on inventory, you may consider inventory financing. In this instance, the inventory itself acts as collateral. These types of loans are best for businesses that are able to repay a loan quickly.

If instead your concern is about purchasing expensive equipment for your new location, equipment financing uses the equipment purchased as collateral. Unlike inventory financing, equipment financing is best for companies that need a longer period of time to repay the loan.

Another alternative to consider is a Small Business Administration loan. A government agency, the Small Business Administration offers several types of loans that can offer low interest rates and high lending limits. These types of loans are best for those businesses that require longer repayment terms and that are undeterred by a longer process to secure a loan.

This is just an overview of some of the most common debt financing options available – hopefully it sets your mind at ease in understanding that there are many options available to suit a retail business of all types.


Springboard Retail thanks the experts at Bond Street for their guest post. This post does not constitute an endorsement of their products or services.

Topics: Business of Retail

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