Retail Loan :

Both business entities and individuals require retail financing to fulfil their diverse funding needs.Today, there are several t\financing options that can qualify as retail lending options. As many of these loans come with unrestricted end-use, one can avail them to fulfil a range of financial shortcomings, both personal and professional. Depending on the funding required and the loan option selected, these amounts are available in high-value too.

What is a Retail Loan?

‘Retail loan’ is an umbrella phrase denoting all forms of credit that financial institutions provide to individuals as well as businesses. These financial institutions are, thus, called retail lenders. Banks, credit unions, savings and loan institutions, and mortgage facilities are a few examples of retail lenders. In an extended application of the term, retail lending refers to loans availed by retail business owners.

Nonetheless, financial institutions provide retail advances to businesses based on their credit score. It’s a 3-digit score, ranging from 300 – 900, that reflects the creditworthiness of a borrower. 

That’s because it shows that a prospective borrower is responsible with credit and less likely to default on repayment. Therefore, credit history plays a crucial role in the availability of retail loans.

Businesses who borrow these loans need to repay the sum along with interest. This repayment takes place on a monthly or annual basis across the tenure of such credit, depending on the predetermined terms and conditions. Since lenders are more lenient towards borrowers with high credit scores, such individuals can access better terms on their loans. 

With KredX, you can avail funds against your business’s unpaid invoices with considerable ease. It involves fulfilling minimum eligibility criteria and documentation formalities.

What Are The Different Types Of Retail Loans?

The different types of loans for retailers are:

  1. Personal Loan For Retailers:

It is an unsecured retail lending facility that individuals avail to meet emergency financial obligations. Since a personal loan is unsecured, you can apply for it without pledging any asset. 

This credit facility does not involve any end-use restriction. Thus, you can use a personal loan to address a variety of expenses in a retail business. It can be used to restock supplies, expand shop premises, renovate facility, etc.

In most cases, businesses require a credit score of 750 or more to qualify for a personal loan from financial institutions. 

  1. Inventory Loan:

Despite the name, inventory loans need not be used to purchase inventory specifically. Instead, it is a secured credit facility, where retailers and wholesalers can collateralise their business’s stock to avail external funding. 

The loan, once credited to the borrower’s account, can be put to a range of uses. Like, retailers can buy new equipment, introduce new product lines for sale, pay suppliers/vendors, etc.

Since the inventory acts as collateral, it provides  security to the financier against losses due to non-repayment of loan liability. However, the functioning of an inventory loan differs from that of other secured loan facilities. 

In the case of an inventory loan, borrower-retailers can sell their business’s pledged stocks and replenish the same subsequently. Selling of pledged assets is not allowed in the case of other secured credit facilities.

  1. Loan Against Property For Retailers:

It’s a secured retail lending option that businesses can utilise to finance high-value expenditure in their retail business. Borrowers need to pledge their residential or commercial property to access this credit facility.

The financier assesses the value of the property and sanctions a loan based on their LTV and the applicant’s eligibility. Usually, a loan against property comes with unrestricted end-use. You can use the sanctioned amount to address a host of financial obligations.

These are the few popular types of retail loans available in India. Invoice discounting is a popular financing solution  that several retail business owners opt for to ensure instant access to funds.

KredX’s invoice discounting platform allows businesses to use their unpaid invoices to gain access to quick access to working capital within 24 – 72 hours*.

How Can You Benefit With a Retail Loan?

Retail lending can be beneficial to borrowers in the following ways:

  • Saves Financial Burden – With a retail loan at your disposal, you can conveniently avail financing and repay over a predetermined tenure. The monetary burden is thus alleviated with a facility to pay in instalments.
  • Convenient For Emergencies – Financial emergencies can be dealt with more efficiently via retail lending options like personal loans or inventory loans. 
  • Boosts Working Capital – Small business owners can avail a retail advance to improve their short-term financial position. 

With different types of retail loans available, you can address your financial requirements with ease. However, ensure that you qualify for a credit facility before applying, and also check the terms and conditions thoroughly. 

KredX provides businesses an easy financing solution with hassle-free invoice discounting services across industries. You can thus secure financing up to 90% of the total invoice value to fund your retail monetary needs.

FAQs on Retail Loan:

A. LTV or loan-to-value ratio refers to the percentage of a property’s value that a financial institution provides as a loan. It is applicable on secured loans, such as a home loan or a loan against property.