Beverage Dynamics is the largest national business magazine devoted exclusively to the needs of off-premise beverage alcohol retailers, from single liquor stores to big box chains, through coverage of the latest trends in wine, beer and spirits.
Issue link: https://read.dmtmag.com/i/565520
Retail STRATEGIES www.beveragedynamics.com September/October 2015 • Beverage Dynamics 25 only choices may be merchant cash advances, cash fl ow loans or alternative (online) lenders. Because they charge high interest rates (up to 150% APR), I advise you only use cash advances and cash fl ow loans as a last resort. Paying these back can put a serious strain on future cash fl ow. After building strong business credit, you should be able to get approved for more favorable types of fi nancing, like SBA loans or bank lines of credit. The application process can take longer, but the money you'll save in lower interest rates is well worth the time and effort. The SBA offers two types of loans: 7(a) and 504. 7(A) LOANS can be used for a number of business uses, including: buying a business, refi nancing an existing business loan, and other big-ticket items. 504 LOANS can only be used for purchasing or building a commercial space. With these loans, you also get the benefi t of working with a banker. Find someone who understands your retail business. They can provide priceless advice, and want to see you suc- ceed. If you do well, they do well. You didn't start a business because you enjoy dealing with the fi nances, but building business credit will make it much easier to grow your vision. And it doesn't have to be painful. Technology options now exist that make it simple to build and use your business credit. Explore what's out there. BD BY LEVI KING IF YOU'RE LIKE MOST BUSINESS OWNERS, you re- lied on personal funds or friends and family to open your fi rst location. This makes sense, because getting a start-up loan for a liquor store is nearly impossible, with 72% of all small-busi- ness bank loan applications being denied. Getting initial business funding is the hard part. But once you're up and running, you can build your business' credit pro- fi le to obtain fi nancing to help you grow or open additional locations—if you plan ahead. SEPARATE PERSONAL FROM BUSINESS CREDIT First, you should take steps to build a business credit profi le that's tied to your company, not your personal fi nances. A few different credit bureaus exist that generate reports and scores based solely on your business. It's similar to personal credit, but the scores mainly refl ect whether your business pays its bills on time. The higher your business credit score, the more likely you are to get approved for business fi nancing in the future. A business can typically get 10 to 100 times more fi nancing than an individual. An easy way to is by opening business credit cards in your store's name. You can start with small commercial credit ac- counts at companies like Lowe's or Staples. Use the cards to buy items your business uses every day, like cleaning or offi ce supplies. Just make sure you use your business' Employer Iden- tifi cation Number (EIN) when applying. It goes without saying, but you should always pay these bills on time—or early. Unlike personal credit, paying your business bills early can improve your credit score. APPLY FOR VENDOR FINANCING Each state has it's own laws—it's not always possible to get liquor distributor fi nancing—but you should check. Just ask your distributor if you can get extra time (net-14 or net-30 day terms) to pay instead of paying cash-on-delivery. This type of fi nancing has two benefi ts: 1. It helps you build your business credit profi le (as long as you pay on time or early). 2. It gives you more time to pay, which helps even out cash fl ow during revenue lulls. If you're approved for vendor fi nancing, make sure the supplier reports your payment history to the business credit bureaus. Most do, but it's not required. LEVERAGE YOUR GOOD CREDIT TO GROW If you've been in business for less than two years, or have a poor business credit profi le, you probably won't qualify for the best fi nancing. Beyond credit cards and vendor fi nancing, your HOW SMART RETAILERS USE BUSINESS CREDIT TO FUEL GROWTH LEVI KING is a six-time entrepreneur who's accessed fi nancing and business credit more than 30 times. Inspired by his challenges throughout that process, he's now at the helm of Creditera, an online platform aiming to improve the credit landscape for each of America's small businesses for free. Visit www. creditera.com to fi nd out more.