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Top Reasons Why Stores Use Retail Financing

Financing Blog
Top Reasons Why Stores Use Retail Financing

Top Reasons Why Stores Use Retail Financing



Remember the old adage “it takes money to make money”? This is the number one reason why stores use retail financing. Before a retail store can even open its doors it must have doors, which requires leasing, buying or building a store front, and having a physical location is only the beginning. Before the first dollars come in, thousands of dollars must go out to cover the expenses of inventory, advertising and general operations.

A retail store cannot survive if it doesn’t have merchandise on the shelves. In order to keep your shelves stocked with the variety consumer’s demand, you will need to have enough inventory to fill those shelves and attract customers. The money needed to provide that inventory comes from retail financing because you’ll need to have the product to sell before you can make a profit to cover the expense of that product. Retail financing ensures the business owner’s ability to maintain a sufficient inventory of merchandise on a daily basis, as well as providing the means of stocking up on inventory in preparation for seasonal business spikes.

Another reason why stores use retail financing is for advertising because no matter how much merchandise you have, if the customers don’t know your business exists, your business will fail. This is especially true for new businesses that need to spread word of their existence and establish a solid customer base. Not only will this financing cover newspaper advertisements and radio spots, but it will also cover the expense of creating and running a website to improve customer traffic in the store itself. As your business becomes more established, billboards and local television advertising can also be financed.

Finally, probably the most common reason why stores use retail financing is to fund general operating expenses. Funds used to cover general operating expenses usually comes in the form of working capital loans. This money is used to cover the everyday costs of doing business such as payroll, building maintenance, and equipment, as well as heating, cooling and electricity along with other expenditures associated with day-to-day business operations.

There are many good reasons why stores use retail financing. In addition to inventory, advertising and general operating expenses, retail financing can help renovate or expand an existing business as well as cover the cost of cleanup and construction resulting from vandalism or natural disaster. The answer to the question of why stores use retail financing is that they can’t afford not to.

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