Funding solutions for the retail sector: £50,000 to refit a tired store
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The retail sector faces many considerable challenges from the internet - but there is one area of retailing where things are looking up.
Small convenience shops are thriving, with new profit lines such as package collection and dry cleaning joining the old favourites of tobacco, confectionery and newspapers.
But although a local shop with a huge range of items can be a money-spinner, it is not enough simply to open the doors and expect customers to flock in. A business must be able to offer a high standard of presentation and cleanliness to meet the requirements of customers and local trading standards inspections.
Investing in modern displays with refrigeration, lighting and security equipment is vital.
We were recently approached by a business owner who ran a convenience store in Staffordshire. His interior was tired and he felt that the business was losing trade to a nearby petrol station.
“They had the latest cool cabinets and lighting, as well as fuel customers coming in all the time. I had shelves that had been put in before I took over the shop - more than 20 years ago. And even I could see that the lighting was making everything on the shelves look shabby."
He believed that he needed refrigerated displays and new LED lighting in order to compete with his more updated competitor.
“I needed to make sure everything I had was fresh - and looked it.”
He planned a redesign of his sales area which would incorporate new displays and freezers, as well as new flooring which would be easier to keep clean, and new lighting which would make food and drink look bright and fresh - and help to deter shoplifters.
He believed that he needed to arrange £45,000 in funding to make the changes.
However, there was a problem. His turnover was good but although his business was profitable, like most convenience stores, his actual profits were limited. He simply did not have sufficient cashflow to let him bring in the equipment he needed or fund the work.
Margins for convenience stores are always tight, and even a high turnover may reflect a low level of actual profits. Many lenders will avoid the sector altogether because of worries about affordability.
To make things more challenging still, as a leasehold business, the owner had no security which he could offer to support the loan application.
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How Rangewell helped
We looked at the shop owner's accounts and saw that, although his margins were narrow, he had an excellent credit history and that this would mean there might be scope for borrowing with an Unsecured Loan - if we could find a borrower prepared to look at the potential of the business.
Unsecured Loans may be suitable for smaller sums, and nothing is required as collateral or security. This means if something goes wrong with your business plans and you’re unable to keep up repayments on your loan as a result, the lender is not able to seize any of your assets.
However, the lender will expect a Personal Guarantee from you and any partners or co-directors that you have.
This means that you would be required to make the repayments if your business could not.
The lender will make the decision whether or not to lend based on a number of factors, including the credit rating of your business - and your credit history.
Unsecured Loan repayments can usually be arranged over 1 to 60 months, depending on the sums involved. Interest rates may vary according to the length of your loan and, with some lenders, you may be able to repay early, reducing the amount you pay overall.
Unsecured Loans mean more risk for lenders and, because of this, they usually include higher interest rates than secured business loans, which means your business will pay more over the life of the loan than it might have done for a Secured Loan.
However, getting unbiased expert advice can help you ensure that an Unsecured Loan really is the most appropriate product for your needs.
In this case, we found a lender who could offer an Unsecured Loan of £45,000 over a 3 year term at just 8%.
Repayments were affordable with our client’s current turnover. He was confident that the extra profits his improvements would bring in would make them even easier to afford.
“I could not afford not to improve my business. Thanks to Rangewell, I could afford to make the changes required.”
At Rangewell we know that getting the agreement that is right for your business can be essential to keep costs down. Call us if your retail business faces a retail funding challenge - we can help you find the answers you are looking for.