24/7 Funding for Your 24/7 Business: Why Convenience Stores Need Flexible Credit Lines
Convenience stores are the cornerstones of American economy. It has transformed from a simple mom and pop shop of 1950s to corporate giants of the current time. However, pandemic has changed the way today’s convenience stores work. The post-pandemic era also has led to a drastic change in consumer lifestyles and a growing preference for local one-stop and round-the-clock shopping is forcing convenience stores to take some drastic measures to stay ahead in the game.
Being open 24/7 is no longer a novelty
but a necessity to stay alive and thrive in this business. It has emphasized on
‘convenience’ and it is more of an expectation now. But it is not an easy
commitment to keep. There is a need for a steady line of support to fulfill
that promise—in form of financial support and flexibility. The Small Business
Administration and most commercial banks often think of convenience stores to
be a high-risk industry because of their low return rate and high inventory
turnover. This results in difficulties in gaining funding support for the
convenience stores, let alone hoping for financial flexibility.
This is where business line
of credit comes into play. It provides the convenience store
owners with both the funding they need to manage inventory, unexpected expenses
and more while providing the flexibility in repayment that could make the risk
of defaulting far lesser than any other business loans.
What is a Business Line of Credit?
To state it simply, a business line of
credit is a flexible financial tool that allows a borrower to borrow capital up
to a certain limit and only pay interest for the amount they use. For example,
if your line of credit is up to $10000 and you use only $2000 from that, you
would have to pay interest for $2000 within the agreed up to term. Unlike traditional loans, a line of
credit allows you to borrow as much or as little as you need without the
obligation of a fixed term loan. Get funds and repay as you go and only pay
interest on the amount you borrowed. This makes it perfect for handling the ups
and downs of cash inflow in a convenience store, making it handy to manage the
seasonal fluctuations and unexpected expenses.
Why is a Business Line of Credit Perfect for Convenience Stores?
There are many reasons why business
lines of credit are perfectly suited for convenience stores. The topmost reason
being the flexibility of repayment. But there are other reasons too. Let’s
check out the three other ways this financing option is useful for convenience
stores:
1. Helping in Inventory Management
One of the major problems that most
convenience stores face is managing inventory. Keeping the shelves stocked with
the latest products and providing a wide range of choices for most products, if
not all, are the two important ways to thrive and keep the customers coming to
your store. This shows that your store is quick to respond to market trends and
consumer demands. And a business line of credit helps you manage your inventory
without any hitch.
2. Planning for Unexpected Expenses
Emergencies can come any time -
whether it is a rise in utility bills or repairing a broken freezer. And these
emergencies require cash in hand to deal with them at the earliest because more
you delay; more it will affect the daily business of your store. A business
line of credit is your safety net, helping you to deal with these issues
without any disruption to your operations.
3. Seizing on Growth Opportunities
Imagine if your store requires a new
service to stand out in the neighborhood or you want to add a new range of
products. You need easy access to capital to invest in these growth
opportunities, to stay ahead in the dynamic retail landscape. And that’s what
this financing options provides-necessary support to stay competitive.
Business Loans vs. Business Lines of Credit – Which One Works for You?
It is already established that a
business line of credit offers more flexibility than traditional loans. With a
line of credit, you can draw smaller amounts and repay interest only on the
amount that you have withdrawn, making it a more suitable solution for the
ever-changing needs of a convenience store. This comes in handy when the
working capital requirement is not fixed or set. And let’s not forget, the
paperwork and documentation for a business line of credit is not as complicated
as traditional business loan. So, consider a stepo to business loans in Singapore before you get one.
Can Revenue-Based Loans Be an Alternative Option?
To be honest, revenue-based loans might be
a suitable option for some convenience stores as these funding options are
linked to monthly revenue, instead of a fixed income. Given that convenience
stores operate on variable income, revenue-based funding can come across as a
flexible option. But they do tend to come with higher interest rates compared
to traditional business loans or even business lines of credit. There are also
other options that you can explore such as merchant cash advance, unsecured
business loan, SBA 504 loans, business credit card and more. So, before you go
with any funding option, thoroughly go over the pros and cons of each solution
and see which one fits with your business goals.
How to Get a Business Line of Credit?
If you’re thinking of getting a
business line of credit, you will need to go through several steps initially.
Most of these steps are like what you will face while applying for a
traditional business loan. Firstly, your credit score and financial statements will be
analyzed to check your creditworthiness. Your eligibility will be determined by
your business’s financial health. You will also need to have a clear plan of
how you will use the funds – whether you need it for expansion or repairing or
inventory – and this must be shared with the lenders. This gives confidence to
lenders that the amount has a purpose.
To sum it all, in the dynamic world of
convenience stores, having a flexible funding option like a business line of
credit as a support can all the difference between succeeding and just
surviving in the game. This financing tool gives you the liquid cash you need
to keep your business running smoothly. As a convenience store owner, you need
to consult a financial advisor to understand how to get the maximum from all
the financial options available as this would help you to meet your consumers’
needs efficiently. The success of your business depends on this.
