All about Retail Business Loans


You must have heard about retail business loan a lot. It refers to loans that are provided by retail lenders. But in some cases, it also refers to the loans taken out by retailers. To clear out the confusion, we have given a brief overview in the post below.

Who are retail lenders?

Retail lenders are known to work with individuals rather than institutions. This may include banks, savings and loan agencies, credit card companies, and credit unions.
The opposite of retail lending is wholesale lending. They are known to grant loans to other lenders. For example, a wholesale mortgage lender may provide mortgage loans to independent loan officers and mortgage brokers. They, in turn, may lend mortgages to individual consumers, which is classified as retail loans.

What do you understand by retail loans?

Retail loans can be regarded as an umbrella term as it includes both personal loans, and business loans.
Coming to personal loans refers to loans such as credit cards, car loans, signature loans, and mortgages. On the other hand, business loans include a business line of credit, a mortgage on a property, an installment loan, an equipment loan, a microloan, or a small business credit card. In short, it includes any other type of loans that are needed for business.

What are loans for retailers?

In some cases, retail loans can also refer to loans taken out by retailers. They apply for retail loans to meet the needs of their small business.
As already mentioned above, many different types of loans are included in this category. Just like small businesses, retailers may also need to apply for equipment loans, mortgages, vehicle loans, lines of credit, and other types of loans to support their businesses.
Then comes inventory loans, which is a rather specific type of loan that appeals to retailers in particular.

What are inventory loans?

Inventory loans are often needed by wholesalers, retailers, or anyone who is into selling products. You can use this type of loan for anything including buying new equipment, working capital, paying bills, launching a new marketing campaign, or any other purpose that would help your business.
Just so you know inventory loans are secured by inventory. This means if the borrower fails on repaying the loan, the lender can claim the borrower’s inventory to cover the losses.

If a retailer applies for an inventory loan, he is allowed to sell and restock the inventory as usual. This indicates that the value of the underlying asset fluctuates as the borrower works on repaying the loan. This is called a floating lien.

To obtain an inventory loan, you are required to have a solid inventory tracking system. The good thing about inventory loans is that it doesn’t require any detailed business plans.

When should retailers apply for loans?

A retailer needs to take his decisions seriously when applying for an inventory loan or any other type of business loan. Before taking out the loan, they should consider the cost of the loan which includes fees, interests, etc.
If the potential benefits are bigger than the risks, it is safe for a retailer to borrow funds. But if the loan doesn’t help their business significantly, they should look for other solutions.
As a retailer, you may feel the need to borrow funds often. In those situations, you may need the help of a retail lender.

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