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Finance & Accounting

The 6 Best Retail Business Loans, According to Your Needs

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Picking the best retail business loan for your specific needs means knowing where to look. We suggest you start with the top six business loans for retail:

  1. SBA 7(a) loans. Best for general expenses.

  2. SBA 504/CDC loans. Best for commercial real estate.

  3. Business lines of credit. Best for sustained cash flow gaps.

  4. Short-term loans. Best for time-sensitive expenses.

  5. Equipment financing. Best for specific fixed assets.

  6. Inventory financing. Best for stocking shelves.

Let’s take a closer look at the top retail business loans by category. Whether you own a flower shop or a bespoke mustache wax boutique, there’s bound to be a loan for your company that will help hedge against downturns, cash flow-stifling bills, and changes in your customer trends.

Retail business loans: Everything you need to know

Now that you’ve made it through a quick overview of the six best retail commercial loans for small businesses, let’s dive right into the details.

Here’s an in-depth description of the top six retail business loans and who should apply for each of them.

1. SBA 7(a) loans

There’s a reason everyone—us, your neighboring small business owner, the US government—raves about SBA loans quite a bit. And that’s because these government-backed business loans really are the crème de la crème.

SBA loans offer generous repayment terms and super-competitive interest rates. With SBA 7(a) loans specifically, the most popular among them, there are few limitations on what you can do with the money if you’re approved.

Why are they so good? SBA loans are guaranteed up to 85% by the US Small Business Administration (hence “SBA loan”). That means banks, which do the actual issuing of the loan, end up more willing to take on your loan since they’ll get repaid by Uncle Sam in case your business takes a turn for the worse. Their risk is lower in case you can’t pay back your loan.

Who should apply for an SBA 7(a) loan?

Anyone who fulfills the minimum requirements should seriously consider applying for this type of business loan for their retail business.

That said, because of their desirability and favorable terms, SBA loans are among the most difficult small business loans to secure. If you’re a US-based, for-profit business with a proven track record of investment into your business (both money and sweat equity), you have the mandatory requirements checked off. Next, you’ll need a strong credit and revenue background.

If that’s you, start exploring what’s involved in putting together an SBA loan application.

2. SBA 504/CDC loans

Your retail business is taking off, your customers love you, and your store’s mobbed on weekends. We can’t help you with the tough decision about whether or not your company’s ready to expand its footprint or open another store. But from a lending standpoint, at least, you have options.

The best retail business loan for real estate is also an SBA loan—but it’s the second most popular program, the SBA 504/CDC loan. This is a loan meant specifically for investing in fixed assets, real estate included. Just like SBA 7(a) loans, these loans are backed by the government, so their rates are low—as low as 4%—and you can borrow up to $5 million. The SBA recently added a 25-year term to some SBA 504/CDC loans making them even more coveted.

Who should apply for an SBA 504/CDC loan?

Of course, as we mentioned above, if you can qualify for any SBA loan (7(a) loans can be used for real estate too), you should definitely try to snag one. But, again, these are the most competitive loans out there, both in terms of desirability and rates, so there’s no such thing as a shoo-in. Take a look at SBA loan requirements here.

If a 504/CDC loan is off the table for you, you can also look to term loans for real estate purchases. Bank loans are difficult to get—especially if you’re a new business, don’t have a long-standing relationship with a bank, or don’t have perfect credit—so you should see which term loans you qualify for if that seems like the right approach for you.

3. Business lines of credit

Part of the unpredictability of retail cash flow means that, even if you get approved for a retail business loan, you might not need to end up using the full amount of your loan. Why pay interest on the money you don’t need to use?

If you need to patch intermittent cash flow issues, a business line of credit is the best retail business loan for you. This type of loan is something of a hybrid between a conventional loan and a business credit card; you apply through a lender for a certain amount, but then draw only what you need, only when you need it. And when you take out money through your line of credit, you’ll only pay interest on the amount you’re borrowing.

Who should apply for a business line of credit?

A line of credit is a great option for retail businesses that need to borrow money for occasional purchases or payments. Consider the line of credit as being similar to borrowing a bit of cash to hold you over, rather than an option for making big-time investments in your company for the future.

This is one of the simpler business loans to get approved for and, if you work through an online lender, you can often get a decision very quickly too. You generally won’t need to show outstanding revenue, time-in-business numbers, or a stellar credit score—just proof that you’ll be able to repay a lender.

4. Short-term loans

It’s tough to make payroll when you get flooded with invoices—or, worse yet, when you have to cover an emergency repair, like a literal flood. You have to make sure your staff gets their checks, but need to keep your doors open for business, too.

This is where short-term loans could really help you out. Granted, this type of retail business loan isn’t the cheapest out there, but it can help out small business owners in a crunch.

Online lenders can approve eligible short-term loan borrowers fast, and get them the financing they need. The repayment periods on these loans are often less than a year, which is one of the reasons they’re ideal for quick-fix situations—like making sure your valuable staff gets paid.

Who should apply for a short-term retail business loan?

Borrowers who need to get their hands on flexible business financing quickly, and aren’t looking for a long-term solution. Payments on these types of term loans are daily or weekly, which is tough for businesses with spotty cash flow. Plus, they’re more expensive than other loans.

The upside? Bad credit is generally accepted—many borrowers get approved around a 600 credit score—which is a plus for accessibility.

5. Equipment financing

You might have a computer from 1989 that manages your inventory, and an ageless dot-matrix printer that still (theoretically) prints orders well past its due retirement. You’ve meant to modernize, but kept deferring investment to more immediate needs.

A form of funding called equipment financing allows you to get what you need and keep your business humming. These retail business loans allow small businesses to purchase any kind of machinery they need for their company—whether that’s a new computer system, an industrial bread slicer, or a new delivery van. And these loans are self-secured, because the equipment you purchase with the loan itself serves as collateral.

Bear in mind that equipment loans come with their own pitfalls. For example, your loan is still in effect if your equipment breaks, which means that you’ll be paying for a broken laptop well after its shelf life. You’ll also have to make sure you’re depreciating the value of your equipment every year as well, as the actual cost will drop as your item ages.

Who should apply for an equipment retail business loan?

If you need to make a big purchase for a specific fixed asset, this can be a great solution. And all you generally need to start the process is an equipment quote. Even newer businesses, and owners with weaker credit scores, can be considered for these loans because of the nature of self-collateralization.

Many lenders can approve qualified borrowers quickly. Interest rates fluctuate between 8-30% (dependent on the purchase and the borrower’s credit), and the terms of the loan last about as long as the equipment does. There’s little paperwork involved in equipment financing loans, too.

6. Inventory financing

Maybe you’re a clothing boutique trying to stock a trend forecasted to spread like wildfire next season, or a coffee shop that needs to tap your usual source for green beans. Regardless, there are going to be times where you need to make big inventory purchases to keep your business churning, and you might not have the cash to support it.

Yet another form of self-secured business funding called inventory financing allows you to replenish stock without having to put up additional collateral. Like equipment financing, the inventory itself is what the bank uses to secure your loan (and will sell it if you don’t repay). This means that you don’t have to tie up your business’s other property or cash in order to get an inventory loan in the works, which can be helpful if you’re operating on a shoestring budget.

Small businesses are generally best served to look outside the network of big banks for inventory loans—you’ll likely have a hard time getting the money you need. Most of the big-time lenders work with wholesalers and larger retailers only, so your best bet is to pursue an inventory loan with an alternative financing company or online lender.

Who should apply for an inventory retail business loan?

Inventory loans usually take one of three forms—a business line of credit, a short-term loan, or a term loan—that a lender issues to a borrower for the specific purpose of buying inventory.

Inventory financing can be a good solution for product-based businesses who need to stock up before busy seasons, or if a huge rush hits and they’ll have a guaranteed sell-through. That “guaranteed” part is pretty important, because inventory financing is both expensive, and also generally requires a pretty high minimum principal as compared to other loans. A lender might need you to borrow more cash than you need in order to qualify—which wouldn’t make financial sense for your business unless you know you’ll be able to sell through the investment.

You also may have to go through a due diligence period where lenders will review your financials—so if you need to seize a quick opportunity, inventory financing might not be the right option for you.

Finding the best retail business loan, no matter what you need

There are plenty of options to choose from if you’re looking to borrow money for your retail business.

Every option—whether you’re looking at a business line of credit, SBA loan, equipment financing, or anything else—comes with its own perks, conditions, and potential setbacks. Before you come to the table, make sure you know precisely what you’re looking to borrow money for—and especially for retail business loans are concerned.

Knowing your needs, plus the differences between the various loan options available to you can end up saving you a fortune in the long run.

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Banking

Overdraft Protection: What It Is and Different Types

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Overdraft fees can be a major drain on your finances. Some banks charge more than $30 per overdraft and potentially charge that fee multiple times per day if you keep making transactions that overdraw your checking account. If you want to avoid these fees, you can typically opt out of overdraft coverage with your bank. It can be useful, however, to set up overdraft protection instead of opting out so you don’t find yourself unable to pay for something urgent.

What is overdraft protection?

Overdraft protection is a checking account feature that some banks offer as a way to avoid overdraft fees. There are several types of overdraft protection, including overdraft protection transfers, overdraft lines of credit and grace periods to bring your account out of a negative balance. Some other overdraft coverage programs might be a combination of these features.

Before you opt out of overdraft protection altogether — which means your bank will decline any transaction that would result in an overdraft — consider how you might need overdraft coverage in an emergency. For example, maybe you’re using your debit card to pay for gas on a road trip. You need enough fuel to get home but don’t have enough money in your checking account. Instead of dealing with running out of gas, you may want to deal with an overdraft.

How does overdraft protection work?

Here are more details about the main types of overdraft protection that banks tend to provide.

Overdraft protection transfers. When a bank allows you to make an overdraft protection transfer, you can link a savings account, money market account or a second checking account at the same bank to your main checking account. If you overdraft your checking, your bank will take the overdrawn funds from your linked account to cover the cost of the transaction. Many banks allow this service for free, but some banks charge a fee.

Overdraft lines of credit. An overdraft line of credit functions like a credit card — but without the card. If you don’t have enough money in your account to cover a transaction, your bank will tap your overdraft line of credit to cover the remainder of the transaction. Lines of credit often come with steep annual interest rates that are broken up into smaller interest charges that you keep paying until the overdraft is paid back. Be aware that a line of credit could end up being expensive if you use this option to cover your overdrafts.

Grace periods. Some banks offer grace periods, so instead of immediately charging an overdraft fee, the bank will give you some time — typically a day or two — to return to a positive account balance after overdrafting. If you don’t do so within that time frame, your bank will charge you fees on any transactions that overdrafted your account.

Other coverage programs. Some banks are taking a new approach to overdraft protection by offering what’s basically a free line of credit with a longer grace period for customers to bring their account to a positive balance. One example, Chime’s SpotMe® program, allows customers to overdraft up to $200 with no fees. The customer’s next deposit is applied to their negative balance, and once the negative balance is repaid, customers can give Chime an optional tip to help keep the service “free.”

Chime says: “Chime is a financial technology company, not a bank. Banking services provided by, and debit card issued by, The Bancorp Bank or Stride Bank, N.A.; Members FDIC. Eligibility requirements and overdraft limits apply. SpotMe won’t cover non-debit card purchases, including ATM withdrawals, ACH transfers, Pay Friends transfers or Chime Checkbook transactions.”

4 ways to avoid overdraft fees

  1. Set up low balance alerts. Many banks offer an alert option so you’ll get a text, email or push notification if your account drops below a certain threshold. These alerts can help you be more mindful about your balance so that you can put more money into your account or spend less to avoid an overdraft.

  2. Opt out of overdraft coverage. If your bank doesn’t offer overdraft protection — or if its only options cost money — you may want to opt out of overdraft coverage, in which case your bank will decline any transactions that would bring your account into the negative. Keep in mind that this option could put you in a sticky situation if you’re in an emergency and can’t make an important purchase because you don’t have overdraft coverage.

  3. Look for a bank that has a more generous overdraft policy. Many banks are reducing or eliminating their overdraft fees, so if overdrafts are an issue for you, do some comparison shopping to see if there are better options available.

  4. Consider getting a prepaid debit card. Prepaid debit cards are similar to gift cards in that you can put a set amount of money on the card, and once you run out, you can load it with more money. The prepaid debit card can’t be overdrawn because there isn’t any additional money to draw from once its balance has been spent.

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Business Ideas

Startup Business Grants: Best Options and Alternative Funding Sources

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Startup business grants can help small businesses grow without debt. But if you want free money to start a company, your time may be better spent elsewhere. Competition for small-business grants is fierce, and many awards require time in business — often at least six months.

Some grants are open to newer businesses or true startups. And even if you don’t qualify now, it can pay to know where to look for future funding. Here are the best grants for small-business startups, plus alternative sources of startup funding to consider.

How Much Do You Need?

with Fundera by NerdWallet

Government startup business grants and resources

Some government programs offer direct funding to startups looking for business grants, but those that don’t may point you in the right direction or help with applications:

Grants.gov. Government agencies routinely post new grant opportunities on this centralized database. If you see an opportunity relevant to your business idea, you can check if startups are eligible. Many of these grants deal with scientific or pharmaceutical research, though, so they may not be relevant to Main Street businesses.

Local governments. Lots of federal grants award funding to other governments, like states or cities, or to nonprofit economic development organizations. Those entities then offer grants to local businesses. Plugging into your local startup ecosystem can help you stay on top of these opportunities.

Small Business Development Centers. These resource centers funded by the Small Business Administration offer business coaching, education, technical support and networking opportunities. They may also be able to help you apply for small-business grants, develop a business plan and level up your business in other ways.

Minority Business Development Agency Centers. The MBDA, which is part of the U.S. Department of Commerce, operates small-business support centers similar to SBDCs. The MBDA doesn’t give grants to businesses directly, but these centers can connect you with grant organizations, help you prepare applications and secure other types of business financing.

Local startup business grants

Some local business incubators or accelerators offer business grants or pitch competitions with cash prizes. To find these institutions near you, do an online search for “Your City business incubator.”

Even if you don’t see a grant program, sign up for their email newsletter or follow them on social media. Like SBDCs and MBDAs, business incubators often provide business coaching, courses and lectures that can help you develop your business idea.

Startup business grants from companies and nonprofits

Lots of corporations and large nonprofits, like the U.S. Chamber of Commerce, organize grant competitions. Some national opportunities include:

iFundWomen. iFundWomen partners with other corporations to administer business grants. You can fill out a universal application to receive automatic notifications when you’re eligible to apply for a grant.

Amber Grant for Women. WomensNet gives two $10,000 Amber Grants each month and two $25,000 grants annually. Filling out one application makes you eligible for all Amber Grants. To qualify, businesses must be at lesat 50% women-owned and based in the U.S. or Canada.

National Association for the Self-Employed. Join NASE, and you can apply for quarterly Growth Grant opportunities. There are no time-in-business requirements for these grants of up to $4,000, but you’ll need to provide details about how you plan to use the grant and how it will help your business grow.

FedEx Small Business Grant Contest. This annual competition awards grants to small-business owners in a variety of industries. You can sign up to receive an email when each application period opens. To be eligible, you’ll need to have been selling your product or service for at least six months. Be mindful, though, that each grant cycle receives thousands of applications.

Fast Break for Small Business. This grant program is funded by LegalZoom, the NBA, WNBA and NBA G League and administered by Accion Opportunity Fund. You can win a $10,000 business grant plus free LegalZoom services. Applications open during the NBA season, which runs from fall to early summer each year.

Alternative funding sources for startups

New businesses likely won’t be able to rely on startup business grants for working capital. The following financing sources may help accelerate your growth or get your startup off the ground:

SBA microloans

SBA microloans offer up to $50,000 to help your business launch or expand. The average microloan is around $13,000, according to the SBA.

The SBA issues microloans through intermediary lenders, usually nonprofit financial institutions and economic development organizations, all of which have different requirements. You can use the SBA’s website to find a lender in your state.

Friends and family

Asking friends and family to invest in your business may seem daunting, but it’s very common. Make sure you define whether each person’s money is a loan and, if so, when and how you’ll pay it back. Put an agreement in writing if possible.

Business credit cards

Business credit cards can help you manage startup expenses while your cash flow is still unsteady. You can qualify for a business credit card with your personal credit score and some general information about your business, like your business name and industry.

You’ll probably need to sign a personal guarantee, though, which is a promise that you’ll pay back the debt if your business can’t.

Crowdfunding

If your business has a dedicated customer base, they can help fund you via crowdfunding. Usually businesses offer something in exchange, like debt notes, equity shares or access to an exclusive event.

There are lots of different crowdfunding platforms that offer different terms, so look around to find the model that works best for you.

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Finance & Accounting

Why Is Crypto Down?

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For crypto investors, any given day can feel like a roller coaster ride. The price of Bitcoin, for instance, regularly goes up or down by more than 5% in a day. In contrast, stock indices like the S&P 500 or Dow Jones Industrial Average rarely see swings that large.

During a bad turn for digital assets, it’s natural to wonder what caused the price drop — and what you can learn from it. Of course, each day on the market may bring a different answer for why crypto is down (or up), but understanding the basic mechanics behind crypto’s volatility can help you make better decisions.

Here are some of the many possible reasons behind big drops in prices:

  • Low liquidity. If a cryptocurrency is trading at lower-than-usual volumes, weird things can happen, like a single large trade throwing off the market by swinging prices closer to the value of that transaction.

  • Speculative trading dries up. High-risk trading with hopes of quick returns can end badly when momentum wanes.

  • Loss of trust. Trust in a product is a price driver. If it evaporates, prices can, too. In addition, because crypto is a novel asset class based on relatively new technology, signs of trouble such as cyberattacks or product failures can adversely affect the overall market.

Whatever the reason behind the crypto price trends of a single day, it’s important to remember that volatility has been a defining part of crypto investing.

Even Bitcoin.org, the website started by Satoshi Nakamoto to help explain Bitcoin, doesn’t shy away from that fact when it states: “relatively small events, trades, or business activities can significantly affect the price.”

Making sense of the bigger picture

In addition to dropping a lot in one day, cryptocurrencies are vulnerable to macroeconomic factors that can push down values for weeks or months.

In November 2021, a price decline turned into a sustained nosedive that continued until midway through 2022, when prices stabilized far below their lofty former highs.

Crypto’s drop coincided with price declines in many asset classes, but the declines in crypto were far steeper. For example, the S&P 500 dropped around 25% but has clawed back about half of those losses. Meanwhile, Bitcoin is still worth less than half of what it was before Thanksgiving 2021.

When explaining crypto’s drop, sometimes called “crypto winter,” experts point to the same root cause: Investors were looking to offload risky assets of all types amid economic uncertainty.

Adam Grealish, director of investment solutions and GM of advisory at Altruist, a software platform for financial advisors, said the scale of these big declines in crypto prices undercuts “the story about it being digital gold and a place where folks are moving to protect wealth.”

“While there’s an interesting theoretical argument for it, empirically it trades much more like a risky, high-volatility asset,” Grealish said.

The macroeconomic environment in 2022 hasn’t been kind to risky assets.

Red-hot inflation has driven prices up. In response, the Federal Reserve raised rates, which lifted the interest charged for all types of loans. When money is more expensive, stocks and other assets can suffer. As a result, investors tend to flee riskier investments, including crypto.

While this is bad news for investors and customers alike, Greg King, founder and CEO of crypto investment firm Osprey Funds, says this is part of an evolutionary process that will improve the industry in the long run.

“Our view is that it’s a positive in cleaning out some of the dead wood there,” he says. “All of the companies that went under that were in the press were centralized operations with poor risk management.”

It’s impossible to know what course the crypto market could take from here.

If interest in cryptocurrency investing recovers to the levels seen in 2021, that could benefit people willing to weather the tough times. But don’t confuse a volatile asset for a basketball; only with the latter can you expect a bounce back because it fell. Volatility means that prices could still go in either direction.

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