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How to Grow Your Retail Business With a Line of Credit

Jan 28, 2020 • 10+ min read
Young woman using a line of credit to grow her retail business
Table of Contents

      The retail grind is all-too-familiar to the modern-day business owner. It’s easier than ever to join the retail space thanks to the digital age. Maybe you started online, maybe you started with a local brick-and-mortar store. Whatever the case, one demand holds true—you want your business to grow.

      Growth means a lot of things to a retail store owner: growth in sales, growth in profits, growth in infrastructure, growth in your workforce, etc. Growth is a product of savvy decision-making and smart investment. In this guide, we aim to offer a little bit of both by describing how a line of credit can fuel your growth strategies.

      First, we’ll take a look at the current retail climate so we can better understand the context of our investment decisions.

      Current State of Retail

      Retail business owner selling to a customer

      Retailers in 2019 have plenty of reasons to be optimistic. We are living in a time of great retail boom. There are, however, certain aspects of retail that are falling out of fad. We should discuss those first.

      Let’s get straight to the elephant in the room. The past couple of years have been grim for many legacy retailers, with nearly 4,000 stores closing in total. Some people have even dubbed it the “retail apocalypse,” as many brick-and-mortar locations have sunk like a brick (pun mostly intended). It’s been commonplace for larger companies to close multiple stores, and a handful of beloved brands have even had to close down completely.

      Here are some examples of popular store closings:

      • J. Crew closed 20 stores
      • Sears closed 39 stores
      • Sam’s Club closed 63 stores
      • Foot Locker closed 110 stores
      • Mattress Firm closed 175 stores
      • Best Buy closed 257 stores
      • Rite Aid closed 600 stores
      • Toys R’ Us closed all 735 of their stores

      What this means, in essence, is that it’s time to rethink the brick-and-mortar approach to retail. Physical storefronts are still a viable revenue source for many companies, while others have been rethinking their retail spaces entirely.

      What’s killing the storefront? Online sales. But we’ll get into that later.

      Now for some good news. Despite the struggles of some monolithic brands, the National Retail Federation has reported that sales are consistently surpassing projections. Tax reform has been credited as a major source of this boost for many businesses, and a number of other positive economic inputs have created a climate where sales are really humming along.

      It’s a great time to be a retailer. One benefit of being an active business these days is the sheer number of ways you can invest in your success. Step one is having money to invest in your growth. That’s where a line of credit comes in.

      Line of Credit

      The beauty of the line of credit is flexibility. We’re talking more flexibility than a Russian gymnast. You can use it for a wide range of business needs, including hiring staff, expanding to a new location, paying invoices, or boosting your inventory. Basically, any business purchase you can imagine.

      Lines of credit are also flexible because they’re revolving. You get approved for a certain amount of money, and you can access it as many times as you need to. Once you’ve repaid what you used, the funds are available for you to use again.

      So you can think of a line of credit as a financial safety net for your business. It’s there if you need it, but you’re under no obligation to use it. And when you do tap into it, you can use it to cover almost any small business need.

      Plus, you only pay interest on the funds you use, not the full amount.

      At Lendio, our lines of credit come in amounts between $1,000 and $500,000. Applicants who are approved can expect access to the funds in as little as a week and, depending on their credit situation, can enjoy an interest rate as low as 8%.

      To get your business line of credit, you’ll typically need to be in business for at least 6 months and have $50,000 or more in annual revenue. You’ll also need a credit score of 560 or higher.

      Also, applying couldn’t be easier. Just fill out our 15-minute application, then compare business line of credit options from 75+ lenders.

      Once you have your line of credit in hand, it’s time to start thinking of ways to use it. One of the passive benefits of using your line of credit, no matter what you use it on, is that as you regularly pay off your balances, you’ll build your business credit. In the long term, you’ll be able to access more financing options with more attractive terms.

      That said, let’s start digging into some ways to utilize your line of credit.

      Open Your First Brick-and-Mortar Storefront

      Retail business owner opening her first brick and mortar location

      This suggestion may be surprising in lieu of our earlier discussion about the death of brick-and-mortar retail, but in reality, brick-and-mortar isn’t dead—it’s just changing. There are ways for your business to open a storefront that are profitable. The key is figuring out if your business will work in a physical space.

      The best way for your business to test the waters of a given location is to open a pop-up store instead of a full-fledged retail store. In addition to helping you minimize spending (retailers can save up to 80% by opening a pop-up vs. a traditional store), pop-up stores allow you to test the waters in a particular location so you can determine whether or not it’ll be worth it to set up a more permanent store.

      Now, getting the logistics of your pop-up store figured out is still quite a process. This stage is where your line of credit comes in handy. Common expenses associated with setting up a pop-up store include:

      • Renting space
      • Obtaining permits and licenses
      • Renting or buying furniture fixtures
      • Transporting furniture fixtures
      • Creating branded materials
      • Hiring staff (if needed)

      Your line of credit can help take care of all these expenses.

      Once you’ve got your expenses planned out, it’s time to figure out your pop-up strategy. Retailers like Birchbox have come up with creative ways of implementing pop-ups into their expansion strategy.

      In 2015, the beauty subscription service launched Birchbox Road Trip, an initiative that would allow the company to determine where they should open their new locations.

      The company invited users to vote on cities where they wanted to see Birchbox, and the winning locations (Chicago, Atlanta, and Los Angeles) each got their own Birchbox pop-up stores. The retailer then gauged the performance of each store to determine where they would set up their next permanent stores.

      The pop-up store is a modern solution to the brick-and-mortar problem. And it’s the perfect way to use your line of credit for growth and expansion. It works as a way to test the waters for opening your first full-fledged shop and every shop thereafter.

      However, you don’t have to leverage the pop-up store to open a brick-and-mortar location. If a desirable piece of property goes on sale in a location that you’ve researched and determined to be a great place to open a storefront, then it might be wise to pick up the property.

      It’s always worthwhile, however, to seek expert advice before you make big financial decisions. In your local small business community, there are likely entrepreneurs who are running or have run multi-location businesses. Fellow business owners are often more helpful than you may think. Buy one of them a coffee in exchange for a little bit of expert guidance.

      Then, you’ll be well on your way to opening your first (or second or third) storefront.

      Add a New Product or Service

      Another way to use your line of credit is to expand your product offerings:

      • Offer additional size options for a single product. If you sell ice cream, you might add a quart bucket for people who want to stock up or a sample cup for customers who want to taste the product before purchasing a regular-size carton.
      • Add a new variation to your existing product line. Instead of selling just green phone cases, you might start offering purple phone cases in the same style.
      • Create a new product that fits within an existing line. If you sell scented bath balls, you may consider adding a new scent to the line.
      • Create a new product line to complement an existing one. If you sell high-end Bluetooth headphones, design an app that integrates with the headphones and the customer’s music collection and lets them EQ songs to their liking.
      • Create a completely new product in the same vertical. Sell Dungeons & Dragons dice in addition to poker dice.
      • Expand to a new vertical. Start renting out your store space as an event venue in the evenings when the shop is closed.

      You could also look into offering services on top of the products you already offer. Think of ways to help customers make the most out of what you’re selling and see if you can provide those services to them.

      Check out Shoes Feet Gear, a footwear and training gear retailer that doubles as a podiatry clinic. In addition to selling running shoes and apparel, they also offer podiatry services to help treat foot, heel, or knee pain, shin splints, and more.

      There are so many ways to expand your offerings, but each requires some kind of monetary investment on your part. R&D costs, manufacturing costs—the list goes on. These kinds of purchases are a perfect way to use your line of credit to expand your business.

      But new products are nothing without marketing. In fact, you could say marketing is the driving force that gets people in the door, so to speak.

      Expand Digital Marketing Efforts

      Retail business owner working with customer

      You may be accustomed to classic forms of advertising like print, radio, and television. Depending on your particular business, these forms of advertising may be effective. They’re not universally effective, however, as they come with some pretty serious built-in limitations.

      One such limitation is that audiences of traditional radio, print, or television tend to be broad and unfocused. This variety means your advertising dollar is less effective per capita. You may get in front of a few of the right people, but you’re paying to be in front of a lot of the wrong people as well.

      Digital marketing offers a solution to this problem.

      Social Media Marketing

      Social media marketing—like using Facebook to target ultra-specific groups of people—is much more cost-effective. It puts your marketing message in front of only the right people for a much more reasonable price. For this reason, social media marketing is one of the most effective and efficient investments you can make.

      Search Engine Optimization

      Another smart digital marketing investment is search engine optimization (SEO). Search engine optimization is all about building your digital marketing strategy around ranking for search results on Google. This strategy should influence everything you do in the digital space.

      It will determine how your website is built, what topics you choose to write about in your blog, what you choose to post or tweet about on social media, and how often you write or post new content. It’s all part of a smart SEO strategy.

      Now, you can spend a boatload of time figuring out SEO for yourself, or you can hire an expert in the field to figure it out for you. Good news is, you have a line of credit, so hiring expert help is in the realm of possibility.

      Having an SEO-savvy digital marketing plan will drive steady streams of traffic to your website. Even though SEO can be complicated, it has an extremely high potential to bring dividends to your business.

      That said, your SEO-generated traffic is only as good as your website’s ability to convert that traffic into sales.

      Optimizing Your Website

      Having a website that incorporates marketing best practices is crucial for converting traffic into sales. If you’re not an expert in this field, you’ll need to find someone who is. Luckily, you have a line of credit, so when you find the right person, you’ll be able to afford them.

      There are 2 kinds of people you need to make your website a sales machine: a copywriter and a marketing-savvy web designer.

      Your copywriter’s job will be to take that SEO traffic and give them a persuasive and compelling message that impels them to action. That action could be anything from giving you their email address to buying a product from your online store.

      Your web designer’s job is to take that copywriting and design a sleek interface that keeps people on your website while making it easy for them to move through the sales cycle.

      Depending on your budget, you may want to hire these experts full-time, or you may want to outsource the work for the most important parts of your website. You’ll definitely want your landing pages, product pages, and homepage to be very professional and well designed.

      These are the crucial building blocks of a persuasive website. Leaving them to your own abilities, especially if you aren’t a marketing expert, will make any SEO or social media traffic almost completely worthless. From start to finish, your marketing experience should be a well-oiled machine designed by professionals to drive traffic and convert it into paying customers.

      Leverage Automation

      The last investment we’re going to look at has to do with the overall efficiency of your daily business procedures. Growing revenue and increasing production aren’t helpful if you’re not also finding ways to reduce costs—otherwise, your profits will begin to diminish even as your business is bringing more revenue than ever.

      As you add new expansion strategies to your business model, it’s crucial to consider ways to reduce or neutralize variable costs while simultaneously increasing output. You can use your line of credit in several ways to help automate your business processes.

      One way is to buy materials for your products in bulk to reduce the per-unit cost of each item. You can also invest in new equipment designed to take care of daily business tasks. You could invest in a marketing automation platform to centralize all of your marketing efforts.

      Anything that helps you cut costs or accomplish tasks in less time and for less money is an automation strategy worth investing in.

      It’s Time to Get Your Line of Credit Working for You

      Retail business owner applying for a line of credit

      Now you know many great ways you can use a line of credit to expand your business operations. I’m sure with your expert knowledge of your business and industry that there are many more investments not mentioned above that would be perfect for using a business line of credit.

      If you haven’t yet secured your line of credit, it’s only a 15-minute application away. Get started today.

      About the author
      Andrew Mosteller

      Andrew Mosteller is a freelance writer and regular contributor to Lendio News. His upbringing in an entrepreneurial family nurtured a passion for small business at a young age. Andrew's father, an equity fund manager, taught him the ins and outs of investment financing. Now, Andrew spends his time writing copy for business owners, helping them expand and advertise their unique brands. He's also studying Strategic Communications at the University of Utah. When Andrew's fingers aren't glued to the keyboard, he spends his time reading, podcasting, composing music, and bombing down the ski slopes.

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