Guide

Why do banks turn down retail businesses for loans?

Because retail ties cash up in inventory and earns a thin margin on it, which reads as poor liquidity on a bank's model. A funder reading monthly sales sees the opposite: a business converting stock into cash on a predictable cycle, with card settlement it can verify and underwrite against.

Why the bank says no

Inventory is an asset a bank discounts heavily. Unsold stock is worth what someone will pay for it in a hurry, which is rarely what you paid, so a balance sheet full of it does not read as strength.

The margin compounds the problem. Retail turns a lot of revenue into a little profit, and a bank's model looks at profit.

The timing is the real bind: you buy stock months before the season and get paid across it, so a bank looks at you at exactly the point your cash is lowest and your borrowing need is highest.

What each underwriter weighs

A BANKA REVENUE-BASED FUNDERPERSONAL CREDIT SCOREheavysomeCOLLATERAL TO PLEDGEheavynot looked atTWO YEARS OF TAX RETURNSheavynot looked atTIME IN BUSINESSheavysomeMONTHLY BANK DEPOSITSsomeheavyDEPOSIT CONSISTENCYnot looked atheavyINDUSTRY AND STATEsomeheavy
The same business, read two different ways. A bank decision is built on credit, collateral and filed accounts; a revenue-based funder builds it on the money moving through your account. That is the whole reason a bank decline says very little about whether you can be funded.

What a revenue-based funder reads instead

Sales are read rather than inferred. Card settlement and deposit history show what actually moves, week by week, which is far better information than a year-old set of accounts.

Buying inventory ahead of a season is a well-understood use of funds, and it is self-liquidating — the stock becomes the revenue that repays it. Funders price that differently from an open-ended cash need.

Repayment moving with revenue matters more in retail than almost anywhere else, because the difference between December and February is not a warning sign, it is the business.

What to have ready before you apply

Six months of bank statements and, if you have them, processing statements.

What the stock is and when it sells. A funder pricing a seasonal buy wants to know when the revenue comes back.

Your monthly deposits, including any online channel that settles separately.

Sources

Related questions.

Can I get funding to buy inventory before a season?
Yes, and it is one of the most common uses. Because the stock converts to revenue within the term, funders generally see a seasonal buy as lower risk than an unspecified working capital need.
Does online and in-store revenue count together?
If both settle into the same business account, yes. Keeping them in one account before you apply usually improves the amount you qualify for.
Is a line of credit better than an advance for retail?
If you qualify, often yes — you draw only what you need for each buy and pay for only that. A line of credit generally needs a score around 600 and more trading history.

One application · every lender we work with

Find out what you qualify for before you need it.