Most times in businesses, business owners seek to expand their businesses, drive more revenue and make more sales, this has led many businesses to obtain loans from banks.
In this article, we will discuss extensively all you need to know about the retail loan, how to obtain it, the requirements, and some of the reasons why your loan is not approved most of the time.
Finally, we will equally answer some of the frequently asked questions you might have about this article. Stay tuned and pay close attention.
What Are Retail Loans?
At times, businesses face ups and downs, this is why it is normal and prevalent for business owners to need loans at some point in their business.
When you borrow a loan as an individual or as a separate business, the loan you have borrowed is called a retail loan.
Retail loans are loans that individuals and businesses obtain from retail lenders, this comprises a different range of loans which we will look into in this article.
Fundamentally, personal loans like mortgages, credit cards, and different car loans all fall into the categories of retail loans.
In addition to these, other loans such as installment loans, different business loans, microloans, and a host of others equally fall under this category.
All these categories put together are called retail loans, mostly because they’re demanded by individuals and not corporate bodies.
These loans are designed fundamentally to meet the needs of small businesses and small-scale entrepreneurs who need help to scale up their businesses in the retail industries.
As we’ve said earlier, the term retail loan serves as a word that embodies all other types of loans that individuals or businesses obtain for personal and business growth. However, the type of loan most business owners and individuals appeal to is inventory loans. We will discuss this later.
Who Are Retail Lenders?
Retail lenders are lenders who give loans to different individuals instead of cooperation or organization. Some good examples of retail lenders include the following.
- Credit loans
- Credit union
- Loan institutions and hosts of others
These retail lenders deal specifically with individuals while the wholesale lenders give loans basically to other loan lenders. If you want to obtain a loan as a business owner, you get the loan from a tested and trusted retail lender, only institutions can borrow from wholesale lenders. Having said this, let’s discuss what we mean by inventory loans.
What Are Inventory Loans?
Inventory Loans are one of the most popular loans business owners and individuals apply for, solely to expand their businesses.
Inventory Loans are loans that are secured by inventory and can be used for anything, you can use it for working capital to buy new equipment, paying different routine bills, starting a market campaign, or any other thing you need it for. This loan is one of the most common loans among different business owners and retailers.
Fundamentally, these loans are secured by inventory and are loans that use a business inventory as collateral for businesses.
This type of loan allows the business lenders to claim the business inventory if the borrower breaches the contract or failed to pay back the loan at the stipulated time
This is very similar to how a vehicle lender can take the car if the borrower does not keep to the agreement.
One of the most important requirements when it comes to taking out an inventory loan as a business owner is that you will need a very strong inventory tracking system. Most times, the lender of such a loan will equally demand your inventory records for them to help them crosscheck and know how much loan you are eligible for.
When A Retailer Should Borrow Loans
For you to take out a loan for the growth of your business is a critical decision you must make, and it requires critical thinking. You need to be able to think carefully and think analytically for you to be able to make the best use of the loan.
You should equally think in the line of the interest rate of the loan. If the loan interest outweighs the intended return on investment, you should reconsider your decision so as not to make any business-threatening mistakes.
However, if you are caught up in a bad situation, you should start early to look for other loan solutions to help you finance your business, taking a loan without proper planning will lead to a very grave and costly business mistake.
If after your analysis, you find out that the loan returns are greater than the cost of your loan, you can apply for the loan immediately.
Difference Between Retail Lenders vs Traditional Lenders
Traditional retail lenders include institutions such as banks, credit unions, savings and loan institutions, and mortgage-focused businesses.
These lenders are at the liberty of offering help to both retail and business customers or at times they might just focus on only retail owners.
One of the most highly regulated types of traditional lenders is the United States traditional lenders, they are highly regulated and as such are expected to follow the laid down rules and regulations to provide all the different types of lending offers throughout the nation.
As conventional lenders they are, these institutions must be either federally or state-chartered and they are usually regulated as such.
This regulatory commission oversight brings a great deal of reporting which helps banks to track a broad range of different statistics which helps them to take notes and report back to the federal government.
Retail lending on the other hand is a widely established business across the financial sector of a country and gathers significant information and profit for the lending institution.
Some of the popular retail lending products include the following
- Personal loans
- Line of credit accounts
- Credit cards
- Home equity lines of credit and mortgages.
Lenders of this loan must have well-established origination procedures which usually allow them to appropriately manage risk across their credit portfolio and also to highly customize the origination underwriting to ensure they are taking on appropriate levels of risk.
The standard of retail lending has increased considerably since the 2008 financial crash and subsequent Dodd-Frank act. Retail lenders have to adhere to a higher standard of underwriting and greater transparency disclosure that usually helps to reduce or eliminate fraud.
Some and the new regulations have broadly helped people to improve the quality of loans that are being issued across the market and equally help consumers from taking debts that can cost them a large part of their business.
Frequently Asked Questions
How Good Is Retail Loan?
From the ongoing discussion, one can infer that a retail loan is a very good way to obtain a loan for the growth of your business. This is a great loan platform because it focuses mainly on individuals who have the interest to scale up their businesses but the wherewithal is not there.
This retail loan serves as an answered prayer for different business owners. All these said, shows that retail loan is a good loan platform, especially for business owners.
What Happens when one doesn’t pay back the loan borrowed?
One of the interesting things about this loan platform is that before you borrow as a business owner or an individual, you must provide collateral, the reason for this collateral is for the retail loan company to hold it till you pay.
At the end of the stipulated time, and you don’t pay back the loan, you will be given a grace period of a few months, if you still don’t pay, they will sell your collateral to replace the loan.
What is the interest rate of your loan?
The interest rate of the loan you borrow is highly dependent on the amount of money you took and the agreement made on the signing of the contract.