Business Loans
for the Furniture Industry

Small business owners in the furniture industry borrow for a variety of reasons – whether it’s to make payroll on Friday, or to invest in marketing a new CNC router. After determining why you plan on borrowing, make a budget for your business plan and add up how much you need to borrow.

Putting together a complete plan helps you fully think through your project. Think about increased labor hours to install or train employees on a new machine. Will your loan cover the equipment costs and transport? Or, if you have concerns that a customer’s payment will not arrive on time, maybe take out a working capital loan to cover an extra two weeks of payroll. 

When borrowing, it’s important to borrow the full amount you’ll need to realize your plans. If you run out of funds during an expansion, it could delay the opening of your new warehouse or drop shipping site. Failing to make payroll one week could lead one of your best employees to look for work elsewhere. 

After you know why you need to borrow, add up all your projected expenses to get the total amount for your loan application. Lenders offer loan products within lending ranges – there are loans for small business owners ranging in amounts from $10,000 to $2 million. If you need a loan for $100,000, spend your time wisely and apply with a lender that you know offers loans that high. 

When borrowing for a small business, your loan’s term should match how long your business will receive a benefit from the borrowed capital. If you’re taking out an equipment loan for a new industrial saw that will be fully depreciated in three years, you don’t want to still be making payments on it in five years. 

Traditional lenders prefer loans that last for several years, not several months. Underwriting a short-term loan has the same costs for them as a long-term loan, but they make less money on it. Focusing on long-term loans allows them to maximize their profits. If you only need funding for a short period, such as a few months, apply for a loan with an alternative lender.

Sit down with your budget and make reasonable predictions about growth in both revenues and expenses that might result from adding a new furniture line targeting millennials, or expanding into online sales. The goal is to have a fairly accurate idea of how your business plan will impact your business’ cash flows. Then calculate the potential loan payment on the amount you plan on borrowing. Can your business’ cash flows extend to cover these payments?

Lenders calculate a loan’s payment by taking the interest and fees on the borrowed capital and amortizing it plus a portion of the capital over the loan’s repayment term. If you have a longer repayment term, you have a long time to repay the loan and will have a lower monthly payment and vice versa. If your business’ cash flows might struggle to cover the predicted loan payment on borrowed capital, you have a few choices.

For some businesses, a large, monthly payment due one day a month can be difficult to align with cash receipts. This is particularly true if the payment date coincides with another large expense, such as payroll. Traditional lenders prefer a monthly lump sum payment – often selected by them – but alternative lenders offer daily, weekly, and bi-weekly payment options. Consider how this might positively impact your cash flows and make that loan payment possible.

You can also take out a smaller loan. This reduces the amount you have to repay, and the interest you’ll be charged, and thus lowers your loan’s payment. If a potential loan payment makes you nervous, take another look at your plans and identify areas where you could scale back. 

Traditional lenders prefer lending to a business that has a long history of success. When you apply for a loan at a bank they could ask to see several years of tax returns, bank statements, and financial statements. If your revenues dipped in 2020 and you’re still recovering, it could be harder to borrow at a bank. 

Without a long and stable business history, it’s hard to have a loan approved at a traditional lender. Alternative lenders look at other factors when evaluating a loan application. As long as you have sufficient revenues, they will extend credit to a business with just two months of history and some blemishes in their past. 

Your credit score reflects your current debt level, debt to income ratios, and past payment history. If you’ve made late payments on a credit card or loan, defaulted on a loan, or declared bankruptcy, you’ll have a lower credit score. Before applying for loans, find out if you have good credit by requesting a free copy of your report. 

If you have poor credit, it will impact who will give you funding. Banks prefer to work with borrowers who have credit scores of 720 and above unless you have significant collateral to pledge. But pledging collateral means that you’re taking on the risk of losing it should you default on the loan. Alternative lenders fund loans for borrowers with scores as low as 530.