Last Updated on October 12, 2022 by Shield Funding Team
Operating a grocery store can be a very expensive endeavor. The costs associated with running a store in the grocery business can be overwhelming at times because of the very high risk inventory, immense product turnover or replacement on a weekly basis, as well as the very low profit margins. There are also extremely high employee expenses as any grocery store requires quite a few employees working long shifts in an effort to meet the important convenience aspect of a grocery store. To make matters worse there is competition on almost every corner.
In an effort to add revenue streams many grocery store owners create local targeted marketing campaigns, constantly offer discounts, establish deli counters, or even add customer incentives such as free delivery. These efforts only add additional expenses to a budget and can often make budget maintenance even more difficult. When budgets begin to explode during slow business periods additional funding is usually required to keep the store open and properly stocked.
Banks are very uncomfortable with lending grocery businesses money. There is huge exposure to losses with fruit and vegetables, and employee costs often eat up a lot of the small profit margins. It is not only being in a particular industry that has banks refusing to lend money, it is the regulatory influence that has made affirming suitability almost impossible unless there is a high credit score established with the borrower. Recognizing that many of these business models are actually fantastic profit makers at many points of the year private lenders like Shield Funding have been pooling money to fund these types of operations in the form of alternative business loans for grocery store owners.
The most common form of lending today for grocery store owners are unsecured business loans. Although they might come under a different name or structure with each lender, this type of funding option is an optimal choice for grocery business owners that don’t have collateral or meet traditional financing requirements. An unsecured business loan offered by private lending companies will depend on the financial position of a company and not just the credit score of an applicant. It is important to note that because these kinds of loans are not guaranteed against some asset they typically will cost more over the life of the financial loan when compared to secured financing. The fees for the unsecured business loan could be inconsequential if one looks at the actual possibility of having to close down a business.
The most well known unsecured business loan or alternative business loan being utilized by grocery store owners today is a merchant cash advance. A business cash advance is an exchange of money for future revenue based on credit and debit card sales, not the credit history of the business owner. This funding solution is targeted at business models that process a lot of credit cards sales such as grocery stores.
Business cash advances are a sale of incoming receipts so there is no interest. Grocery store owners can have access to immediate funding for up to 500k and pay back a little at a time as each sale in the store is generated or swiped. A percentage is determined from the beginning and each sale will have that percentage deducted until the business cash advance and additional premiums for the money is paid back.
Another unsecured option is available for grocery store owners that have seen their credit score decline. Business loans for poor credit are available with a very similar structure to business cash advances, except that there are also funding options for those owners with bad credit that do not process credit cards. Most business cash advance companies offer this funding option as well as other lenders that specialize in providing business loans for bad credit.
Business loans for grocery stores are more available today than ever before. The financing is generally unsecured and credit history is usually not an issue because the funding is based on the financial strength of the business or its sales. Acquiring an unsecured business loan or a business cash advance from Shield Funding are just two of the many new funding options available today for owners in the grocery business. If you require additional information on any of these funding options you can search online and find plenty of information.