Retail loan: is it the right choice for your online store?

Every eCommerce business hits a point where the need for growth is undeniable, but the cashflow isn’t quite there to support it.

‍It’s a frustrating loop—growth requires capital, but generating capital requires growth. 

Retail loans offer a way out of this dilemma, providing the financial support you need to keep your business moving forward.

You can use these loans for various purposes, including but not limited to operational expenses, managing everyday transactions, or brand expansion.

In this blog post, we’ll dive into what retail loans are, the benefits they offer, and why they might be the perfect fit for your brand.

We’ll also break down the different options available, including both traditional and alternative retail lending solutions.

What is a retail loan?

As the name suggests, a retail loan is a business financing solution designed to support the operational needs of retail brands.

Whether you own a brick-and-mortar store or run an eCommerce business, it provides the capital to fuel growth, manage cashflow, and invest in key areas like inventory, marketing, and technology.

How does a retail loan work?

A retail loan functions like any other loan. You borrow a specific amount of money from a lender and agree to repay it over a predetermined period, with interest.

Here’s a breakdown of the process:

1. Application: you apply for a loan, providing financial information about your business, such as revenue, expenses, and credit history.
   
2. Approval: the lender assesses your application and determines the loan amount, interest rate, and repayment terms based on your financial profile and business performance.
   
3. Disbursement: after you agree to the terms, the lender disburses the funds—usually deposited into your business account.
   
4. Repayment: most retail loans have fixed terms. You must repay the principal and interest over a set period with regular payments.

That said, we would like to clarify that retail loan terms can vary widely between lenders. Some may offer flexible repayment options, while others may have stringent requirements.

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Discover 5 tips for securing the capital you need to scale your business

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Benefits of retail loans

Retail loans aren’t just about filling financial gaps—they’re an investment in the future of your eCommerce business.

By leveraging the benefits of retail lending, you can position your store for sustained growth and success in a competitive market. 

When used strategically, this business financing model can help you:

Boost your inventory without breaking the bank

One of the biggest challenges in eCommerce is maintaining enough inventory to meet customer demand, especially during peak seasons.

‍With retail lending, you gain the financial flexibility to purchase stock upfront, ensuring your best-sellers are always available without depleting your cash reserves.

Enhance your store’s layout and user experience

A well-organized store—be it physical or digital—attracts more customers and increases sales.

Retail loans provide the capital needed to upgrade your store layout, improve site navigation, or invest in a more responsive web design.

‍Enhanced user experience (UX) often translates to higher conversion rates, driving more revenue.

Grow your digital presence

In today’s digital landscape, a strong online presence is critical to success.

‍Retail lending can fund your digital marketing efforts, from SEO and paid ads to social media campaigns and influencer partnerships.

By reaching more customers online, you increase your chances of driving traffic, boosting sales, and expanding your market share.

Strengthen your logistics and operations

As your eCommerce business grows, so do the demands on your logistics and operational infrastructure.

‍You can use this loan to invest in better warehousing, faster shipping options, and advanced inventory management systems.

Streamlined operations lead to improved customer satisfaction and encourage repeat business—critical for long-term success.

Manage your finances with confidence

Cashflow is the lifeblood of any business.

Retail lending offers a financial cushion during slow sales periods, allowing you to cover operational costs, pay suppliers, and keep your business running smoothly.

This stability in business financing enables you to focus on growth strategies without the constant worry of cash shortages.

Scale your brand

Retail loans are ideal for funding the launch of new product lines, expanding your customer base, or opening new online marketplaces.

These efforts can significantly boost your revenue, allowing your business to grow faster and reach new heights.

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Suggested read: How to manage cashflow during unprecedented times.

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Types of retail loans

When you’re looking into business financing, you’ve got a mix of retail lending options to consider.

These fall into two main buckets: traditional retail loans and alternative financing options.

Traditional retail business loans

These are the loans your parents probably told you about. They’re usually from banks or backed by the government.

And they are more structured and often cheaper in the long run, but they are tough to secure. 

Some of the most common traditional retail lending options are:

1. SBA loans

Small business administration (SBA) loans are usually government-backed.

So, lenders are more willing to take a risk on you.

You’ll find low interest rates, long repayment periods (we’re talking up to 25 years for some), and you can borrow big—up to $5 million.

These loans are ideal if you’ve been running your business for a while and have solid financials.

They’re perfect for big moves like buying a larger storefront, investing in new equipment, or acquiring a competitor.

The downside? Getting one is a hassle. The process can drag on for months, requiring a business plan, financial statements, tax returns, a solid credit score, and a mountain of paperwork. 

Our tip: if you’re just starting out, especially in eCommerce, an SBA loan might not be the best fit right now, but keep it on your radar for future growth.

2. Line of credit

Think of a line of credit (LC) as a financial safety net. It’s not a lump sum loan—instead, the bank offers you a pool of money that you can dip into as needed.

It’s super flexible, which is great for retail since business can be unpredictable. 

Whether you need to stock up on inventory for the season or replace a piece of equipment in a pinch, a LC has your back.

‍You only pay interest on what you use, and as you repay, that money becomes available again. It’s like a reusable water bottle for your finances. 

That said, approval for a line of credit is easier than for an SBA loan, but your credit score still plays a big role.

Also, watch out for variable interest rates—they can shift unexpectedly.

3. Inventory financing

Inventory financing is all about using the products you sell as collateral for a loan.

This type of loan is a lifesaver for businesses that need to stock up before a busy season or expand their product lines. 

The inventory itself backs the loan, making it easier to qualify.

However, if your inventory doesn’t move as expected, you’re still responsible for the loan, and the interest rates can be on the higher side.

4. Merchant cash advance

This isn’t really a loan—it’s more like selling a piece of your future sales.

‍You get a lump sum of cash upfront, and in return, you agree to pay back a percentage of your daily sales revenue until you pay off the advance.

Merchant cash advance is fast money, which comes in handy if you need quick cash.

The good thing is, it's easy to get—even if your credit isn’t that good.

However, it comes with steep fees.

We’re talking much higher than traditional loans.

And since repayments come out of your daily sales, it can put a squeeze on your cash in hand.

Our tip: use this option carefully. It can be a band-aid for a cashflow emergency, but it’s not ideal for long-term financing.

5. Purchase order financing

This retail loan works best for those moments when you’ve received a big order but don’t have the cash to fulfill it.

The lender pays your supplier directly, and you return the funds once your customer clears their dues. 

Purchase order financing is an excellent option for businesses that are landing bigger fish than they’re used to. It lets you take on larger orders without turning them down because of lack of capital.

The catch?

It can be expensive, with fees that are often higher than traditional loans.

And it only works for businesses that don’t heavily modify the products they’re reselling. 

Alternative retail business loans

If traditional loans feel too rigid or out of reach, alternative financing options might be a better fit.

They offer more flexibility and quicker access to cash, catering to businesses with different financial needs and credit situations.

1. Revenue-based finance

This is like the “choose your own adventure” of business financing.

You get a lump sum upfront, and you pay it back as a percentage of your monthly revenue.

Having a slow month? You pay back less.

Killing it with holiday sales? You pay back more.

It’s great for businesses with inconsistent cashflow or seasonal sales, since repayments adjust based on your income.

Plus, you keep 100% of your business ownership since it’s non-dilutive.

Compared to traditional retail loans, revenue-based finance (RBF) is an efficient, collateral-free option, that too, with reasonable interest rates.

2. Invoice financing

This business financing model lets you borrow against your outstanding invoices, giving you quick access to cash without waiting for customers to pay.

You send an invoice to a customer, sell that invoice to a lender for a percentage of its value, and get the rest when your customer pays, minus the lender’s fees.

Let’s say you’re a wholesaler who just shipped $100,000 worth of product to a big retail chain with Net 60 payment terms.

But because of unforeseen issues, you need hard cash immediately.

With invoice financing, you could get $80,000 or $90,000 right away, letting you restock or take on new orders without waiting. 

It’s a quick way to inject quick cash into your business without taking on traditional debt.

You get a portion of the invoice amount upfront, and the lender takes a fee once your customer clears the invoice. Plus, it doesn’t require any credit score, since the invoice itself is the collateral.

Each of these options has its pros and cons. The right choice depends on your business’s situation—how long you’ve been operating, your financial health, what you need the money for, and how quickly you need it.

We recommend you shop around and even combine different financing options to find the best fit for your retail business.

Financing should be simple—we make it happen

Traditional loans have their perks, but let’s face it—they often miss the mark for modern businesses, especially small retailers and eCommerce stores.

The endless paperwork, complex requirements, and lengthy approval processes make them out of reach for most. 

Even if you manage to navigate the maze, you could end up waiting weeks or even months to get the funds you need.

That’s not exactly helpful when you’re trying to keep up in a fast-paced market where trends change overnight.

Today’s businesses need quick, flexible financing solutions that let them access the funds they need—when they need them. We get that.

At Stenn, we’ve spent years perfecting our services to ensure we meet the dynamic funding needs of modern brands.

If you own a retail store and need funds without the headache, we’ve got you covered.

‍Unlike traditional lenders, we’ve tailored our financing solutions to meet the specific needs of businesses like yours—whether you’re in eCommerce, SaaS, export-import, or beyond.

Here’s the thing: we have taken a unique approach to funding.

We don’t care about your credit score or how long you’ve been in business when offering you revenue-based financing or invoice financing.

Instead, we focus on your revenue streams, including your transactional revenue.

What does this mean for you?

• Much higher chance of approval compared to traditional loans. 
• You can borrow up to 150% of your monthly revenue.
• Pay a fixed fee of just 6% to 9.5% per transaction. 
• And finally, you choose the repayment terms that work best for your business.

Our process is as straightforward as it gets: apply online with minimal paperwork, and if you meet our criteria, we’ll get back to you within 24 hours. 

So, why wait? Get the funds you need, without the hassle. Start your application with Stenn today and scale your business on your terms.