Retail financing takes multiple forms, but they share the general goal of injecting cash into a retail business’s funds to help it operate. This article takes a look at three predominant types of retail financing: loans, merchant cash advances, and equipment financing.
Cash Advances
When a business takes out a cash advance, the business receives a short-term injection of cash from the financing entity. Generally, this involves one of two financing types.
The first financing setup is through a merchant cash advance. In this setup, the business receives cash, and then the lender withdraws a percentage of the business’s credit card sales, often on a daily basis.
The second financing setup involves ACH withdrawals. They are taken from the business’s bank account daily until the cash advance is paid back.
Different lenders will charge different markups for these services depending on the business’s creditworthiness and other factors.
Inventory Retail Financing
As the name suggests, inventory financing involves taking out a loan or using a line of credit to purchase inventory. Lines of credit are often a preferable route, as you can access the precise amount you need for inventory. Then, you’ll pay back the withdrawal to restore the amount of credit available.
Franchise Financing
Franchise retail financing helps franchisees get their franchise branch up and running. Some parent organizations run lending programs to help new franchisees out. Other potential sources of franchise financing include banks and alternative lenders.
Equipment Financing
Almost all businesses need some kind of equipment to operate. If purchasing the equipment outright is prohibitively expensive, businesses can use equipment retail financing to gain access to it. This can take the form of a loan, which is often preferable for equipment that will remain in use past the end of the loan’s repayment, or a lease, which is generally good for shorter-term equipment needs.
To explore retail financing and other funding options in greater depth, you can always talk to an expert at Speed Funding. Contact us to get started.