get a personalised recommendation in minutes with our solutions advisor

Understanding Business Finance For Retailers

Running a business can be difficult, and the retail industry is no exception, with external market forces that are impossible to control and tricky to plan for. It could be that an extra injection of cash is needed to help you achieve growth, plug a cash flow gap or get you through an unexpected tough…

Running a business can be difficult, and the retail industry is no exception, with external market forces that are impossible to control and tricky to plan for.

It could be that an extra injection of cash is needed to help you achieve growth, plug a cash flow gap or get you through an unexpected tough time. Fortunately, there are funding options available for a variety of scenarios, so if you need finance you might find something tailor-made to your circumstances.

In this article, we’ll look at examples of possible scenarios and the funding options that might provide the answer, whether you need a bit of extra working capital to see you through seasonal demand or a significant investment for a new store.

Equipment leasing for a new EPOS system

If you need a piece of equipment that’s key to the success or growth of your business, but don’t have the working capital to buy it, then equipment leasing could help.

Leasing lets you rent something for a pre-agreed period of time. So, if you need an EPOS system, for example, you can pay a monthly amount to lease it rather than buying it; you don’t need to find the cash to buy it outright and you don’t have the responsibilities of ownership such as servicing and maintenance.

When your lease comes to an end, you might have the option to give the equipment back, buy it for the outstanding amount, or extend the lease in exchange for a newer model — depending on the type of arrangement.

If you have an item on lease, it’s classed as an operating cost and therefore written off against gross profit. This can improve your tax position, although you should talk to your accountant before you sign anything.

You can lease almost anything, and it can be a great way to take your business to the next level by accessing assets that you wouldn’t otherwise be able to secure.

Revolving credit for your supply chain

Many retail companies rely heavily on their supply chain, especially when buying goods to sell on. Ensuring you have the working capital to buy the stock you need, when you need it, can mean the difference between flourishing and failing.

It can, therefore, help to have easy access to funds that you can draw down quickly, as and when needed. This is what you get with a revolving credit facility. It’s a rolling agreement, which enables you to access funds from an already-approved limit, similar to a business overdraft.

Once you have repaid some of the amount, you can usually withdraw more. Because you’ve already been approved for a credit limit at the start of the agreement, it’s the perfect solution when you need cash quickly. This cash reserve will give you a pot to dip into to pay your suppliers on time, on short-terms, and in those instances where you suddenly need a larger order than expected.

Revolving credit facilities are flexible, quick and easy to set up. However, that flexibility does often come at the price of a higher interest rate than a fixed business loan — although depending on how you use it, it might still work out cheaper in practice.

Merchant cash advances for seasonal challenges

The retail business can be very seasonal and no matter how much you plan and prepare, it’s sometimes difficult to predict exactly what stock and staffing levels you’ll need. You might need to ramp up operations for your Christmas boom or dial it back for a seasonal slump.

Merchant cash advances are a great form of finance for businesses which use a card terminal to process payments. It uses your card terminal to ‘secure’ lending – so no other assets are needed and it can be set up quickly to cover a short-term cash requirement.

The lender will work with your terminal provider to set an amount based on how much cash is flowing through your business each month. Repayments are taken as a proportion of your revenue, which means they are higher when times are good and lower if you’re having a lean month.

This gives you a potential funding source to call upon if you need to service seasonal demand, or to get through a slump. Repayments are taken at source, so you know they are covered. However, the amount you can borrow is restricted by your turnover and is typically in line with your average monthly income.

Unsecured business loans for growth

Sometimes a larger injection of cash is needed. If your business is growing quickly, an unsecured loan might give you the finance you need, especially if the company doesn’t own any assets or you’d rather not offer them up.

There are a variety of lenders out there offering unsecured loans of up to £250,000 in the right circumstances, which could help take your business to the next level of growth. This could be launching a new product, rebranding, or even opening a new branch. Unsecured loans are usually quicker to set up, with a lower or no upfront cost but a higher cost overall.

However, because of the increased level of risk, it can be harder to get an unsecured loan. Lenders will look at your trading history and may ask for a personal guarantee – which means you’re personally liable if your business can’t keep up with repayments. This gives the lender some assurance of getting their money back if the worst should happen.


In this article, we’ve provided a general overview of some of the different funding options available to retailers, and how they could help in particular scenarios. However, this is only scratching the surface as each funding option will have its own eligibility, criteria and suitability for your business and its needs.

Using a matching service like Funding Options can help you narrow the field and find the perfect lender for you.

Conrad Ford is Chief Executive of Funding Options, recently described by the Telegraph as “the matchmaking website for small businesses and lenders”. Funding Options has been selected by HM Treasury to help businesses find finance when they’re unsuccessful with the major banks, as part of the Bank Referral Scheme that launched in November 2016. @FundingOptions

About the author

Yell Business Avatar

Give us a call to see how we can help with your business