Retail runs on inventory. Stores and online sellers often pay suppliers weeks or months before products sell, and the busiest season, usually the fourth quarter, needs the most cash up front.
The right financing depends on what you're paying for: inventory and seasonal stock call for flexible credit, while a new store, a warehouse or an acquisition calls for longer-term loans. Here are the main options and how lenders look at retail and e-commerce businesses.
Financing Options Compared
Business Line of Credit
Best for: Seasonal inventory, purchase orders, timing gaps
Draw before peak season and repay as inventory sells. Interest applies only to what you've drawn.
Learn moreSBA 7(a) Loan
Best for: New stores, acquisitions, expansion, refinancing
Up to $5 million with long terms. SBA Express lines (up to $500,000) can also fund seasonal working capital.
Learn moreSBA 504 Loan
Best for: Buying a storefront or warehouse you'll occupy
Typically 10% down with a long-term fixed rate on part of the loan.
Learn moreAsset-Based Lending
Best for: Larger retailers and distributors with significant inventory and receivables
Borrowing capacity grows with your inventory and receivables, which suits fast-growing businesses.
Learn moreEquipment Financing
Best for: Fixtures, POS systems, warehouse racking, forklifts
The equipment secures the loan, preserving cash for inventory.
Learn moreTerm Loan
Best for: Store remodels, website and systems upgrades, marketing pushes
Fixed payments over a set term, best for one-time investments with a clear payback.
Learn moreWhat Lenders Look For
Sales trends
Twelve months or more of sales, including your peak and slow seasons. For online sellers, marketplace and payment-processor reports help.
Inventory turnover
How quickly inventory sells and how much is aging. Fast-turning, sellable inventory supports larger credit lines.
Margins and customer acquisition costs
Gross margin after discounts and returns and, for e-commerce, what it costs to acquire a customer through advertising.
Concentration
Dependence on one marketplace, one supplier or one product line. Lenders look for diversification or a plan to manage the risk.
Cash flow coverage
Whether cash flow covers new debt payments with room to spare, typically a debt service coverage ratio of about 1.25 or better.
Documents to Prepare
- Two to three years of business and personal tax returns
- Year-to-date profit-and-loss statement and balance sheet
- Inventory reports and an aging of payables
- Marketplace, Shopify or payment-processor sales reports for online sales
- Bank statements for the last six to twelve months
- Lease or purchase details for a new location
- A schedule of existing debt
Tips Before You Apply
- Set up a line of credit months before your peak season, while your financials look strongest.
- Match the loan to the asset: short-term credit for inventory, long-term loans for property and expansion.
- Clean up aged and slow-moving inventory before applying; it can lower what lenders will advance.
- Keep marketplace payouts flowing into one business account so lenders can follow your revenue.