Capital structured around inventory and seasons.
Retail cash flow is bumpy by design. You buy inventory months ahead of sale, you pay rent every month regardless, and your fourth quarter pays for the rest of the year. Lenders who understand retail underwrite this rhythm; the ones who don’t end up declining good operators because the bank statements look uneven.
How do retail stores finance inventory?
The usual answer is a line of credit sized to one inventory cycle. You draw when you place the buy, and you pay it back as the goods sell. Interest only runs on what you actually have out, so a line that sits unused costs you nothing. Size it to one full turn — the cash you tie up between writing the purchase order and ringing the last unit at the register. For most independent stores that is somewhere between one and three months of cost of goods. Term loans work too, but they start charging the day the money lands, whether the shipment has arrived or not.
What we see funded
- Inventory purchases ahead of holiday or back-to-school. Large bulk buys typically get better unit economics; the gap between purchase and sale is the financing problem.
- Build-out and storefront refresh. New location, signage, fixtures, lighting. Term-loan territory.
- POS and tech upgrades. New register systems, eCommerce integrations, inventory software.
- Slow-season working capital. Outdoor recreation, beachwear, ski, costume — carry rent and core staff through Q1 or Q3.
- Speed bridges. A bulk-buy opportunity, a one-time supplier discount, an emergency repair. RBF when the timeline is days, not weeks.
What a retail deal usually looks like
A gift and home-goods store does $900K a year, with 38% of it between Thanksgiving and New Year’s. The owner writes holiday orders in July and pays for them in September. The store does not see that money back until December. We open a $150K line of credit. She draws $120K in September and pays it down through January. Interest runs on the drawn balance only, so the line costs nothing the rest of the year.
Other shapes come up often. A storefront refresh — fixtures, lighting, signage, paint — usually runs $60K to $120K and goes on a 36-month term loan. A one-time closeout buy that has to be wired in 48 hours is RBF territory, typically $25K to $75K repaid over six to nine months.
What lenders look at
Retail underwriting has one big difference: lenders ask for 12 months of bank statements instead of three. They need to see a full year to tell a seasonal business from a shrinking one.
After that, four numbers.
- Gross margin. Is your markup steady, or are you discounting harder each quarter to move the same goods?
- Inventory turn. How many times a year you sell through and replace your stock. Slow turn ties up cash and worries lenders.
- Rent as a share of revenue. A high number leaves nothing to absorb a bad quarter.
- Concentration. If one supplier or one product line drives most of your sales, that is a risk the lender prices in.
Owner credit counts for more in retail than in restaurants, where deposits carry the file, and for less than in professional services.
What we recommend
If inventory drives your business, a line of credit sized to one full turn is almost always the right tool. Build-out and refresh are term-loan jobs. RBF is for emergencies and short windows — a closeout buy, a burst pipe, a supplier who wants cash today.