5 types of finance available for retail businesses

28 Jun 2021

After a long period of closure, retail businesses are now back open and able to welcome customers in again. However, this has meant many businesses in the retail sector are finding it difficult to keep up with their cash cycles and outgoings for essentials such as stock, staff and rent. We take a look at some of the different facilities available to business owners who are looking for financial support within the retail sector.

retial finance for businesses in the UK

The current state of the retail industry 

With physical stores closed for the majority of 2020, the industry saw a significant rise in online shopping as the pandemic forced many non-essential shops like retail businesses to close, driving customers online. 

As restrictions have eased, the high street has seen many casualties and many big names in retail haven’t survived and have been forced to close their physical stores. A shift in consumer behaviour has also meant that many people have felt uneasy about returning to physical stores and have continued to shop safely online. For many retail businesses, being able to let customers back in has been important for survival.

Whether you’re selling solely online, have a physical shop or even run both, coming out of the lockdown was tough when you’re trying to run a retail business. From stock supply, staff costs and rent, there were unavoidable costs associated with opening up again for many businesses who hadn’t earned anything months before.

For retail businesses in the UK, there are a few different financial support options to help keep businesses running, even after months of closure, relieving the pressures of the day to day costs of running a business.

Types of funding for retail businesses

It’s important for lenders lending to retail businesses to offer flexible repayment options, after such a challenging time for the industry. Having access to flexible alt-fi facilities such as Revolving Credit Facilities (RCF) and Merchant Cash Advances offer retail businesses an option to pay back the loan as their shop starts earning again. 

This kind of funding will help retail businesses get back up and running without being tied to rigid payback agreements and allows room for growth within the business.

Some of the other flexible funding options that can be tailored to suit retail businesses specifically include:

1. Merchant cash advance

A merchant cash advance is the most common type of cash ash advance and it is a clever alternative finance option for businesses. Merchant Cash Advances provide businesses with a loan which is then paid back through a percentage of customers’ card payment, unlike a traditional loan that fixed monthly repayment.

It’s flexible to your sales intake – meaning you pay back less when you’re trading less and vice versa. An MCA is another type of lending based on the future revenue of your business and if you’re running a retail business online, this is often easy to prove.

2. Unsecured loans

If you don’t want to, or can’t, offer security for a loan or simply don’t have any assets to use as collateral for a loan, then an unsecured loan could be a great option for your business. 

Unsecured loans are a fast lending option for businesses that need to buy more stock, which makes them a great option for retail businesses.

3. Revolving credit facilities (RCF)

Another great option for increasing the working capital option for your businesses is a revolving credit facility. A revolving credit facility is a flexible finance type that enables you to access finance for your business on a ‘tap in, tap out’ basis. 

You can withdraw money when you need it, use it to pay for something, repay it then withdraw it again at a later date. And with a revolving credit facility, you only need to pay interest when funds have been ‘tapped’ into. As the loan is really flexible, it can be made available for as long as your business needs.

4. eCommerce finance

If you’re running a retail business online, your business could benefit from eCommerce finance. Whether you need more staff, more stock, or want to invest in your online presence, eCommerce finance may be a good option for your business. 

If you're already using an online platform to run your business such as eBay, Magento or Amazon, lenders can easily integrate with your systems to analyse your online accounts to check your current trends and affordability. It’s a quick and easy way to secure funding to keep your business running.

5. Recovery loan scheme (RLS)

Following on from CLBILS, BBLS and CBILS the Recovery Loan Scheme is the latest iteration of the government loan schemes. The RLS seeks to provide businesses with access to the finance they need to succeed and grow during the UK’s economic recovery. 

The RLS is designed to help businesses manage cash flow, investment and growth post-lockdown. It is available for eligible businesses in the UK and offers a variety of loan options for businesses such as term loans, invoice finance, business overdrafts and asset finance. The RLS offers loans up to £10million and depending on which option you choose, the repayment is up to years but this depends on the lender.

Overcoming the devastating impact of forced closures has been vital for retail businesses to stay open so we understand that having flexible loan options that can meet your individual business needs is important to the survival of your business.

Using a combination of the expertise of our Business Finance Experts and technology, Funding Options can match you with a business finance option suited to your business needs, goals and circumstances. Find out what your business could be eligible for today in just a few steps.

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Simon Cureton

Chief Executive Officer

Simon has been Chief Executive Officer at Funding Options since 2019, spearheading its transformation into a leading fintech with the launch of its Funding Cloud platform. Simon has over 27 years of experience in financial services, having held senior posts at some of the biggest players in the industry all over the world.

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