Why a Capital Advance May Be Better for Your Retail Business Than a Traditional SBA Loan
Retail business owners commonly need working capital to cover the cost of new inventory, payroll, or equipment. But is it better to apply for a traditional loan from the U.S. Small Business Administration (SBA), or should you consider a capital advance?
Here’s what retailers need to know about each financing option — as well as some of the ways that a capital advance might put you ahead.
Financing Options for Retail Businesses
Retailers can benefit from an influx of cash flow. You can use this cash for a variety of business needs, including:
- Payroll
- Utilities
- Inventory replenishment
- New point of sales equipment
- Distribution and shipping services
Loans backed by the SBA can offer retailers access to working capital and other loans. But these loans typically have high eligibility requirements that put them out of reach of many retail business owners.
A capital advance is completely different. In fact, it’s not a loan at all. Instead, a third-party provider will purchase a portion of your future revenue, giving it to you in a lump-sum payment. You’ll have quick access to cash and repay the advance based on your future revenue.
How a Capital Advance Can Help Retailers
Why might a capital advance be preferable to retail business owners? Take a closer look at some of the reasons why you might consider a capital advance instead of a traditional SBA loan.
Faster Access to Working Capital
For starters, a capital advance will usually be faster than a traditional SBA loan. With fewer eligibility requirements and a smoother application process, retailers can expect to receive their funds right away.
That’s good news for retail businesses. The sooner you have cash in hand, the sooner you’ll be able to jump on new opportunities to expand your business. Additionally, the ability to quickly make payments for new supplies or inventory can nurture strong relationships with your vendors.
Lower Eligibility Requirements
An SBA loan typically has stricter eligibility requirements. You’ll commonly need a strong credit score and a reasonably lengthy business history. As a retailer, you might not have the business history or business credit you’ll need to qualify. Even if you do, you may be confronted with unfavorable loan terms — or a smaller loan than you’d anticipated.
A capital advance has none of these requirements. All you’ll really need is a revenue projection based on your prior sales history. Retailers can therefore use a capital advance even if they lack the business history or credit needed to qualify for other loans.
Less Risk
Retailers may be surprised to discover that SBA loans often require collateral or even a personal guarantee.
While you can use your business assets as collateral, you’re on the hook if your business struggles to make on-time payments. And when you sign a personal guarantee, you’ll be personally responsible for at least a portion of the loan if you fail to make payments.
Since a capital advance isn’t an actual loan, you won’t face the same risks. Instead, you’ll simply receive a cash advance based on projected sales data, with no need for collateral or a guarantee.
Grow Your Business With Strategic Financing
As a retailer, options like capital advances and dual pricing/surcharging programs, such as Simpay Select Plus, can help you successfully navigate the cash flow you need to maintain or grow your retail business. With the right funding, you can expand your customer base through new product lines and continue thriving in a competitive market.
