August 09, 2021

How to Get a Retail Loan with Bad Credit

If you own or manage a retail business but don’t have the best credit history, you may wonder whether you’re eligible for a retail loan with bad credit. The good news is there are still funding options at your disposal. In this blog post, we'll explain what you need to know if you’re interested in a bad credit retail loan. By fully understanding the loan application process, you can increase your chances of qualifying for loan options, even if you have a poor credit score.

6 Ways to Improve Your Retail Business Loan Application If You Have Bad Credit

1. Check and Improve Your Credit Score

If you’d like to take out a retail loan with bad credit, you'll need to start by pulling copies of your credit reports. If you find any errors or inaccuracies, be sure to dispute them right away to boost your credit score. The higher your score is, the more likely you are to get approved, so it’s well worth your time to go through this process. Even if you don’t find any mistakes on your credit reports, you’ll have a good idea of where you stand and what types of retail loans you may qualify for. If you’re displeased with your credit score, you may want to improve it before applying for financing. To do so, we suggest:
  • Pay all your bills and invoices on time
  • Reduce your credit utilization ratio
  • Establish credit accounts with suppliers
By improving your credit score, you can open the doors to more financing options and better terms.

2. Gather Documentation

Once you check your credit report, dispute any errors, and work to increase your score, collect the documents you’ll need to apply for a retail loan with bad credit. Since every business financing lender will have their own unique documentation requirements, you should gather as many relevant documents as possible. This way, you’ll have them on hand and be able to meet any lender’s requirements, regardless of how rigorous they may be. Some examples of documents lenders may ask for include:
  • Profit and loss statements
  • Projected financial statements
  • Accounts receivable reports
  • Bank statements from the last three months
  • Tax returns from the past three years
Lenders will also likely ask for business licenses, leases, and deeds.

3. Create or Fine Tune Your Business Plan

A business plan is a blueprint for a successful business. You can think of it as a guide that will help you lay out and meet your goals. Since most business financing lenders will ask for a copy of your business plan, it’s important to create one from scratch or ensure the one you have is in optimal shape. Your business plan should include a variety of components including:
  • A company overview
  • Information about your products and services
  • A market analysis
  • Financial projections
  • Information on your management team

4. Determine How You'll Utilize Business Funding

One of the greatest advantages of a retail loan is its flexibility. No matter if you’re an eCommerce business, brick-and-mortar business, or both, a retail loan may help cover costs such as:
  • Hiring and training employees
  • Inventory
  • Equipment
  • Marketing
  • Legal and accounting services
  • Commercial properties
  • Utilities
  • Insurance
As long as the funds will help you run, improve, or grow your business and you meet the other requirements, a business lender will likely approve you.

5. Understand the Types of Retail Loans

Fortunately, there are a variety of retail loans that small business owners can choose from, even if you have bad credit. Some of the most common options you may want to consider include:
  • Traditional Retail Loans: With a traditional retail loan, you’ll receive a lump sum of money upfront. Then, you’ll repay the loan amount via fixed monthly payments over an agreed upon term, which can be anywhere from a few months to several years.
  • Lines of Credit: A line of credit is a flexible financing option as it allows you to borrow as much or as little as you want up to a set credit limit. Due to this, you'll only pay interest on the loan amount that you borrow, which is unlike some other financing options.
  • Merchant Cash Advance: With a merchant cash advance, you can borrow against your future earnings. Remittance will depend on your daily or weekly credit card sales. Many retail business owners appreciate this funding option because the remittance process ebbs and flows based on their sales, so they don't risk not being able to afford repayments.
  • Inventory Loans: Inventory loans are intended to help you fund the cost of inventory for your retail business. The inventory you purchase secures your business loan so if you default, the lender will seize it.

6. Research Online Lenders

After you determine the ideal retail loan for your situation, you should take time to research lenders that can help you. Shop around to find at least a few lenders that can accommodate your cash flow needs. Once you have a list of potential business funding lenders, carefully compare factors such as:
  • Qualifications
  • Interest rates
  • Loan terms
  • Fees (annual fees, loan origination fees, prepayment fees, etc.)
Also, you should check their Better Business Bureau (BBB) profile and customer reviews to ensure they are reputable companies with positive track records. Your goal should be to find a lender that will not only likely approve you but offer you the most favorable terms as well.

Conclusion: Take Your Business to New Heights with a Retail Loan

If you don’t have the cash on hand to run or grow your retail business, a bad credit retail loan may be the ultimate solution. Not only can it support your short and long-term goals, a retail loan is a great way to improve your business credit score. However, you must ensure that you make your loan payments on time and in full. If you follow the tips in this blog post, you'll increase your chances of qualifying for a small business loan, even if you currently have a bad credit score. New call-to-action