Alternative lending can help sporting goods stores pickup their games
By Ritchie Sayner
Winter is approaching and sporting goods and outdoor stores need to bring their “A” game. Right now, customers are undoubtedly coming through your doors to shop for coats and hats, snowboards, ski boots, hand warmers, basketballs, volleyball pads and more. Before you know it, they’ll be on the lookout for great deals on kayaks, cargo shorts, baseball gloves and other equipment for spring and summer activities.
Sensing a trend here?
Sporting goods and outdoor stores have no offseason; they’re constantly reacting to customers’ demands, while also purchasing inventory for each new season. And like any small business, these retailers need financing to keep up with the constant demand for products.
As a general category, sporting goods stores have seen their consumer sales increase every year since 2002, reaching a high of $62 billion in 2013. But while the industry as a whole is strong, it still isn’t a slam dunk to obtain business financing. Banks are still hesitant to lend to any small business, let alone an independent specialty store, and they have understandably tightened their standards ever since the recent recession. Viable collateral, high credit score and a strong, successful business history are now essential components to the financing process, but many businesses struggle to keep up.
So what can your sporting goods operation do if you’re denied a bank loan? The answer lies in alternative lending.
What is alternative lending?
Alternative lending is a new financing method that emerged in the wake of the recession. When regulators forced banks to strengthen their requirements, small businesses needed somewhere to turn and alternative lending has been there ever since.
Alternative lending has one aim: get small businesses money as quickly as possible. With alternative lending, your credit score is not a major factor, collateral is not necessary, and you can get approved and obtain the money in days.
A merchant cash advance is the primary method through which business owners receive alternative lending. A merchant cash advance is not a traditional loan; it’s an advance against your business’ future credit and debit card receivables. Every month, a small percentage is taken from your credit/debit card sales until the advance is paid off. A merchant cash advance generally works with your cash flow, so during slow months the lender will take less. During strong months, the lender will take more.
But once you receive financing from an alternative lender, what are your options? How can you improve upon your business with alternative financing? Some of the options include:
Purchasing inventory: Retail is an inventory-based business; therefore it is necessary to consistently have fully stocked shelves for each season. Right now, you should be preparing your business for the winter, while also keeping up with what consumers want in the fall, such mid-weight outerwear and golf equipment. Regarding golf, as an example in particular, if your store doesn’t have a golf simulator or an area for golfers to practice their shots, this may be a nice draw for you to add to the store, and alternate lending came make such capital expenditures possible.
Advertising and marketing: Getting the word out about your store should be the primary objective at all times. To start, social media platforms such as Facebook and Twitter are an excellent (and inexpensive) way to promote your company. Consumers appreciate visuals, and social media gives you the chance to show off your inventory and equipment while allowing you to get creative. For traditional advertising, you should continue to consider radio, print, billboards and even TV, which when purchase locally is surprisingly cost effective. While all the talk is about social media these days, traditional advertising is still a strong player in the business world and still the leading drivers of purchasing.
Expansion and renovation: Alternative lending also can contribute to your remodeling efforts. Whether you want to include an addition on your current store or open a brand new location, you can use the money you receive from alternative lending for these projects. At some point, most successful small businesses outgrow their initial space and need to move on to something bigger and better.
Special promotions: Ever want to hire a local professional athlete to conduct an autograph signing and meet-and-greet with the fans in your community? These high-profile events can boost sales and raise awareness of your store and brand. You may think it’s difficult to lure some of these athletes, but don’t let that stop you from reaching out. Many have community obligations to fulfill and are happy to participate when presented with an opportunity to make extra money and meet the fans who support them during and after their playing days.
Alternative lending has become a reliable source of funding for small businesses across the U.S. If you’re a sporting goods store owner looking to improve your business with some extra financing, alternative lending may be for you if you’re struggling to secure funding from a bank.
The sporting goods industry never gets a timeout, so make sure you’re doing everything you can to help your business compete with larger franchises.
David Goldin is the President & CEO of AmeriMerchant, a leading provider of working capital solutions for businesses. David’s previous experience includes co-founding an Internet development company and building it from four to 50 people before it was eventually sold. David is also a founding member and President of the North American Merchant Advance Association (NAMAA).
