As consumers appetite for craft beers and specialized liquors increases, it’s no surprise that more and more liquor store owners are seeking funding to rebuild during the 2020 pandemic or grow their business. Most liquor stores operate a store-front operation in high-traffic areas and need funds for inventory and marketing. When small business liquor stores flourish, it not only fuels our country’s economic engine but puts people to work and strengthens communities.
Entrepreneurs who own liquor stores in need of capital have a plethora of funding choices. Funds from a small business loan can assist you in expanding your business through hiring and staff training, purchasing equipment, refinancing existing high-interest debt, and, during the COVID crisis, putting safety measures in place.
This guide explores several small business loan options available, explains how they work, and discusses the pros and cons of each.
There are many ways funds from a business loan can be used to shore up your business. If you need money for the following, it’s a good time to seek funding.
If you need funds for working capital, hiring or more, there are lots of options. Some are fast, others take more time, some are costly and others offer low-cost funds.
So where do you turn for funds? Here are options available for small businesses.
If you qualify, the Small Business Administration’s low-cost loan programs can be your best option. SBA 7(a) loans have low rates, long terms and very low payments to fuel stability, growth and savings.
There are three types of SBA loan programs available for business owners, the 7(a) Loan Program, the CDC/504 Loan Program and the Microloan Program.
An SBA 7(a) loan can be used for a variety of purposes.
For in-depth information about the popular SBA 7(a) loan program, visit the SmartBiz Small Business Blog and review our comprehensive article: What is an SBA Loan?
This program was created to give small businesses low cost funds for expansion or modernization. Typically, up to 50% of project costs are funded by a lender backed by the SBA. CDCs (Community Development Corporations) usually fund up to 40% of the project cost. The final 10% is a cash down payment expected to come from the small business owner.
A 504 SBA loan might be a good fit for small business owners interested in purchasing a commercial real estate property and if their unique business circumstances fit with the public policy goals of your local CDC.
The Microloan Program is for very small businesses, including start-ups and provides loans of up to $50,000. Requirements to qualify for a microloan can vary depending on the lender. Proceeds from an SBA Microloan can be used for most business expenses but not for paying down debt or real estate purchases.
There are plenty of non-SBA loan options available although they may have higher rates, shorter terms and larger payments.
A business line of credit allows you to borrow funds up to a limit based on your credit, typically smaller than a term loan. You only pay interest on the amount you use, and you can continue borrowing as necessary until you reach the set maximum. These loans are usually unsecured, meaning that you won’t have to provide collateral to qualify. For in-depth information, read this post from the SmartBiz Blog: Small Business Lines of Credit Pros and Cons.
Business credit cards are revolving lines of credit. The main distinction is that they don’t terminate once the predetermined limit is reached. They work like personal credit cards, with varying spending rewards and offers depending on the lender. Learn more here: 5 Business Credit Card Myths.
A merchant cash advance (MCA) is most often used by small businesses that accept credit and debit card sales. You receive a specific sum in advance that is repaid either by a percent deduction from daily transactions or through daily or weekly payments.
Keep in mind that MCAs often lead to extremely high annual percentage rates. Even the minimum within the range can be several times larger than term loan annual percentage rates and can reach up to well over 300%. For more info, read What You Need to Know About an MCA.
If your business needs funds more quickly than an SBA loan, consider applying for a bank term loan. SmartBiz currently offers term loans through its bank partners for working capital, debt refinance and new equipment purchase:
*Interest rate depends on loan term and the applicant's credit and financial profile.
Learn more here about Bank Term loans available through the SmartBiz bank network: Bank Term Loans.
When you find a lender, several important financial documents will be required. It’s a good idea to work with an accountant or bookkeeper to help you gather paperwork. Note that if you have strong credit scores, you’ll be able to get a lower cost loan faster.
Protect your credit score
Don’t put in multiple applications as your credit could lower with each inquiry. Find a lender who does an initial “soft pull”, also called a “soft inquiry” of credit. Bad credit can sink your chances to qualify for low cost funding. For information on this, read Hard and Soft Pulls of Credit: What you Need to Know.
Work with a lender who values transparency
Unfortunately, not all small business lenders are on the up-and-up. Confusing language and calculations can result in paying much more than you think you signed up for. Make sure you work with a financial professional who is responsive and answers all questions clearly. Stellar customer service is key.
How much do I want to borrow?
Take a look at your business plan to determine where you currently stand and where you want to go. Create financial goals and speak with your accountant to nail down an amount. Look at the cost of the loan and all fees to get the true cost.
When would I like to repay the loan?
Long term loans generally have the lowest rates and 10 years or more to pay off. If you’re in it for the long haul, long term is best. If you plan on early payoff, check with your lender about penalties.