How To Get A Grocery Store Business Loan

How to Get a Grocery Store Business Loan

While there’s an abundance of grocery stores spread out all over the country, but there have been a lot of changes to the grocery industry in recent years. Consumers are more health-conscious and want ethically- sourced, organic food and fresh ingredients.

While it’s great to be able to supply people with healthy food, it also means that the food that you stock is going to be more expensive. This is the dilemma that many grocery store owners face. However, if you properly utilize a business loan, you can give your customers what they want without breaking your bank.

In this article, we’ll tell you all about how to get a grocery store business loan.

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The Best Loan Types for Grocery Stores

One of the first things you need to know when you’re learning how to get a grocery store business loan is which types of loans are best for grocery stores.

Here’s an overview of the best types of loans for the grocery store industry:

  • Canada Small Business Financing Program Loans
  • Term Loans
  • Revolving Line of Credit
  • Equipment Loans
  • Merchant Cash Advance
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Canada Small Business Financing Program Loans

The CSBFP (Canada Small Business Financing Program) is a program designed to partner with lenders to ensure you get a good loan. Because the CSBFP joins up with the lenders, they take on part of the risk, and that means that lenders are able to provide you with lower rates.

Business owners that qualify for the CSBFP will definitely be given better rates.

Term Loans

Business term loans are loans that are repaid in regular intervals over a specific period of time. The terms of the loan repayment can be anywhere from one to 10 years.

Business loans for grocery stores aren’t always complicated, and with this type of loan you can use it for whatever you need it for, so it’s important to learn about term loans when you’re learning how to get a grocery store business loan. 

Revolving Line of Credit

If you’re learning how to get a grocery store business loan, then you should learn about a revolving line of credit. They work just like other loans in terms of how you go about paying them back.

However, once you’ve paid the loan off, you can take out another loan up to your credit limit and not have to deal with the hassle of going through the approval process again.

They do typically have higher interest rates when compared to term loans, but you get longer terms with a revolving line of credit.

Equipment Loans

Equipment loans work a lot like term loans. There is one major difference, however. If you choose an equipment loan, then the equipment you purchase with the loan is used as collateral.

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Merchant Cash Advance

If you’re here to learn how to get a grocery store business loan, then you should learn about merchant cash advances. A merchant cash advance is when a lender provides the borrower with a lump sum of cash upfront.

The borrower then repays the advance using a percentage of their credit and debit card sales. Since grocery stores receive lots of credit and debit card payments, it makes merchant cash advances a good option for any grocery store owner looking for funding.

What Do People Use Grocery Store Business Loans For?

One of the things you need to know when learning how to get a grocery store business loan is what people use this type of loan for. This will help you to determine what you use your funding for.

Here’s a look at some of the things that people use grocery store business loans for:

  • Working Capital
  • Expansion
  • Advertising and Marketing
  • Purchase Inventory
  • Purchase or Upgrade Equipment
  • Workforce and Payroll
  • Pay Taxes
  • Pay Suppliers and Vendors

Working Capital

This is the capital and assets that you have available to you to pay for day-to-day operations. Because of the many expensive daily operations of grocery stores, it’s not uncommon for business owners to seek out grocery store financing to obtain working capital.

Expansion

It takes a lot of money to complete a grocery store expansion, and getting a small business loan for a grocery store can make it possible.

Advertising and Marketing

Anybody reading this article about how to get a grocery store business loan is aware that advertising and marketing require a lot of money. And if you don’t have the time and energy to manage advertising campaigns yourself, then you’ll have to hire someone else to do it, which costs even more money.

But a grocery store business loan can make it easier to fund your advertising and marketing efforts.

Purchase Inventory

As I mentioned previously in this how to get a grocery store business loan article, many people are seeking fresh, organic and ethically- sourced food, which means that grocery store owners are being required to stock more expensive food and produce.

A business loan can help cover some of the added expenses.

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Purchase or Upgrade Equipment

There’s a lot of equipment that grocery stores need in order to function properly. So if you’ve been considering upgrading your POS or setting up self check-out registers, a business loan can help.

Workforce and Payroll

If you’re a grocery store owner reading our how to get a grocery store business loan article, then you may be interested to know that grocery stores are one of the biggest employers in the country.

Unfortunately, that means that grocery store owners spend a lot of money to pay their workforce. Since paying your employees is a crucial expense, you can get a business loan to help cover it.

Pay Taxes

Grocery stores really take a financial hit whenever it comes to taxes. If you find that you’re paying more in taxes than you can afford, you can get a business loan to help cover your expenses.

Pay Suppliers and Vendors

One of the things you’ll learn when learning how to get a grocery store business loan is that you can use the loan to pay your vendors and suppliers.

This is incredibly helpful because paying suppliers and vendors is a massive expense for most grocery stores.

Before Getting Your Loan

This section is important for anyone learning how to get a grocery store business loan. We’ll tell you all about the preparations you need to make before you go out and get your loan!

Create a Business plan

You need a detailed business plan in order to get a small business loan. It should include information about how your grocery store operates, how much money is going in and out, and your long- term plans for the business.

Keep Track of Your Cash Flow

Find out whether or not your business is making more money than you spend because this is something lenders look for when they determine whether to approve small business loans.

You need to be able to prove that you can repay the loan on time, so it’s important to keep track of your finances.

Make Sure You Have a Good Credit Score

One of the best pieces of advice we can give you in this article about how to get a grocery store business loan is this: if you don’t have a good credit score before applying for a business loan, wait and take action to improve it before you apply.

The better your credit score, the more likely you will be to have your loan approved, and you’ll be a lot more likely to get lower interest rates and better terms, which makes it easier to pay the loan off in the long run.

Document Your Business History

If you’ve been in business for a few years and have a proven, successful track record, this is quite favorable in the eyes of lenders. The more that you can tell lenders about how much your business has improved over the years, the better.

Document your humble beginnings. Tell them about business failures that you worked to improve. You would think that it’s not a good idea to tell lenders about failings, but if you can use them to indicate business growth, that’s absolutely something you should include when you speak to a loan officer.

Don’t be embarrassed to talk about inadequate space or equipment you had when you first started, either because you can put a similar spin on that.

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Conclusion: How to Get a Grocery Store Business Loan

If you’re in the grocery industry and wondering how to get a grocery store business loan, the application process is the same as any other business loan. You can use a grocery store business loan for nearly any business expense that you need help with.

And if you follow the advice in this how to get a grocery store business loan article, you should be well-prepared with all of the documentation and work necessary to give yourself a good shot at loan approval.

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FAQs about How to Get a Grocery Store Business Loan

What do I need to know after I go through the loan application process?

You should know that no matter what type of loan you’re applying for, the loan approval process is a long one. Ask your loan officer about how long loan approval typically takes. And be sure to keep in touch with your loan officer. Things that you should definitely inform your officer of are additional cash flow, or business successes.

What rates can I expect with a grocery store business loan?

There are a lot of factors that go into determining what sort of rates you’ll get, such as your qualifications and the lender you choose. But you can generally expect rates that are similar to these:

  • Term loans: 5%- 10%
  • Line of Credit: 5%- 15%
  • Cash Advance Factor Rates: 1.15- 1.55

Why would a grocery store need to get a business loan?

Big grocery store chains may not need the additional funding, but many small grocery stores struggle with low profit margins. This makes it difficult to pay for many things, such as equipment, and business loans help cover these costs.

How do I determine the loan amount before I apply?

You should consider what you want to use the loan for, and how much money you need to accomplish that task. You should also consider how much money you can feasibly spend to pay off a loan.

Can I get a grocery store business loan with bad credit?

Yes, that is quite possible. The catch is that you’ll have higher rates and you won’t have ideal terms.

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April 14, 2022
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