It is a widely accepted saying that liquor stores are recession resistant. Because no matter what the economy is going through, you always need a drink to deal with that. But as most liquor store owners know and understand, running a liquor store is not all bubbles and spirits. Given that the profit margin is pretty thin compared to other industries and complexities of the business, it is crucial that you have your finances in order to accelerate your business growth. Whether you need the capital to expand to a new location, make building improvements, invest in a better POS system, or offset payroll costs–having easy access to funds is of utmost importance for any liquor store owner.
For most small businesses and startups in the United States, getting a loan for business purposes is a very important step. With this article, we will guide you through the process of securing a business loan, specially customized for liquor stores and explore other funding options like business term loans, business lines of credit and other loans for liquor stores.
Assessing Your Business’s Funding Requirements
What does your liquor store actually needs? Are you looking for new inventory? Do you want to expand your store to a new location or invest in marketing? These are some of the questions you need to answer before you start shopping around for financial options.
Identifying the reason for the business loan will help you select the right type of funding for your company.In most cases, loans for liquor stores are especially customized to meet the specific challenges faced by alcohol retailers. The loans can help in meeting requirements like inventory purchases, store renovations, marketing campaigns, hiring staff or even cover the costs of obtaining necessary licenses and permits.
Understanding Different Loans for Liquor Stores
Liquor stores have a variety of options when it comes to funding. This is mostly because most lenders view the industry positively due to its stability and recession-proof nature. Though the pandemic has not affected the industry, quick access to funds still remains the key to overcoming cash-flow gaps or seizing growth opportunities. So, here are a few funding options you can explore for your liquor store business:
SBA 7(a) Loans
With affordable repayment terms and lower interest rates, the Small Business Administration (SBA) 7(a) loans are still popular among liquor store owners. SBA offers assurance to lenders, which mitigate their risk and encourages support for entrepreneurs. It makes securing loans easier for small businesses.
Business Lines of Credit
This type of financial option offers flexibility, which allows liquor stores to manage their cash flow and cover unexpected expenses. The store owners can draw the amount that they require and repay interest only on the amount used. This allows businesses to withdraw small amounts to meet their immediate business needs.
Merchant Cash Advance (MCA) Loans
In lieu of a percentage of future sales, MCA loans provide a lump sum of capital. This might be useful when the requirement is high and immediate but be aware of the higher interest fees levied on the loan.
Traditional Bank Loans
If you already have an established business and don’t mind long-term financing, then go for traditional bank loans. These loans offer competitive rates, favorable terms but need a good credit history, collateral and a detailed documentation.
How to Prepare Your Loan Application
If you are looking to secure a loan for your liquor store, you need to keep certain key steps in mind. Firstly, you need to have a detailed business plan ready, describing your business model, market analysis and financial projections. Secondly, your financial statements, including balance sheets, P&L statements, as well as cash flow projections should be clearly laid out. Then comes your credit history, which will be reviewed by the lenders to assess the risk. Keep in mind that your credit history does not only include your business credit score but your personal score too. Finally, the collateral. You need to have assets to offer as collateral and this can include inventory, real estate or equipment.
How to Handle the Business Loan Process for Your Liquor Store
Figuring out the loan process can be difficult. Navigating your way through complicated terms and then assessing whether it suits your goals or not, is not an easy process. But don’t worry,here’s a step-by-step guide for you:
Select the Loan
Go through all the types of business loans available and determine which one is suitable for your needs. It can be any loan – from SBA loan to business line of credit to MCA loans.
Compile Documentation
Ensure that you have all your documents at one place – tax returns, bank statements and legal documents. If any of the documents are missing, it can hinder your application process.
Submit Application
After filling the application form,check it thoroughly before submitting it to the chosen lender.
Wait for the Approval
Depending on which loan you have chosen; the approval time can take from a few days to several weeks. Don’t lose patience, be ready to respond to any additional requests from the lender.
Conclusion
Getting a loan for business purposes is important when it comes to achieving your goal. And especially for liquor stores, getting access to funds quickly can help them stay ahead of their competition. But it is very important that you do not rush into making a decision that can put a burden on the financial health of your business. So, go through all the available loans, assess them for suitability, check the terms and conditions, and consult with a financial advisor before you apply for the funding.
