The funding key to retail success

Mike Nolan

For the smaller retailer, financial support is a prerequisite for business success but it is sourcing this support that can prove challenging. However, there are a number of funding solutions that can offer the springboard to growth and expansion.

by Mike Nolan, Managing Director of Academy Leasing


As UK retail sales continue a period of sustained year-on-year growth, business owners can look forward with a sense of optimism as households look to splash their cash on consumer goods. And within the convenience sector, the long-term trend for shopping more frequently has provided opportunity for sustained growth.

But as the sector looks to make hay while the sun shines, it also faces some tough decisions on how best to expand operations. Despite a gradual improvement in net lending to SMEs over the past few years, it still remains challenging to obtain funding from the banks.

If banks happen to say no to you however, all is far from being lost – alternative options are available.

Lease to preserve working capital

As many convenience operators know, leasing, rather than buying, retail equipment for business expansion can free up cash to invest elsewhere to support growth. By making monthly payments, retailers can then be better placed to pay for the equipment with the improved cash flow generated.

A lender with good knowledge of the sector will be acutely aware of any potential returns on investment equipment, such as new EPoS systems or smart point of sale displays, may generate and will therefore more likely to provide approval. Such a system, for example, might help to maintain accurate stock control data and ensure that the right amount of stock is available when needed.

In some cases, retail equipment can be in place before a borrower has even been asked to make a payment, allowing them to immediately reap the rewards from greater revenue streams.

Making timely regular payments can also help to build up a strong credit history for your business.

Borrow against your retail assets

A retailer’s tangible assets, in most cases its stock, have a clear value that can be exploited to release working capital.

If an asset finance specialist believes an organisation’s business plan is sound and the debt can be adequately serviced, it will lend money against inventory or other assets without the need for further securities. Typically, lending will be arranged based on a valuation of the assets and the amount of serviceable debt. In the event this debt cannot be serviced, the company will be given the chance to sell the assets for a fair price.

Borrow to buy

In some cases, expansion by acquisition may represent the best possibility for retail businesses targeting more rapid growth to maximise available opportunities.

There is no shortage of opportunities here either and for retailers the necessary funding can be raised against the acquiring organisation’s assets.

Such funding is two-fold. First, the acquiring company must find the necessary finance for the deal itself and then secure sufficient working capital to ensure the move does not end up putting both businesses at risk.

Supporting your ambition, drive and determination, a well structured finance package should minimise your risks while maximising your return and allowing you to ensure that you’re on the right road to retail success.