Grocery Store Financing: How to Get Grocery Store Business Loans

Few places are as important to a neighborhood as a local grocery store. They’re must-visit stores that have a high propensity toward repeat customers, can excite customers with new offerings and exotic ingredients, and can even give a town a gathering place to meet neighbors old and new. If you’re thinking about opening one of your own, you’re likely exploring your small business financing options as well.

Grocery stores, despite being in demand, tend to be a low-margin business. That means your best bet at long-term success boils down to a few crucial components. Namely, you’ll make your money by selling high volumes of goods, rather than a few expensive items with a bigger profit margin. This makes grocery store financing all the more appealing as you handle the fluctuations that come with running a business on low-priced, perishable items.

The good news is getting a loan for a grocery store or supermarket doesn’t have to be a grueling process. If you know how to anticipate your needs, understand your business finances, and have a good handle on your options, you’re well on your way toward getting the grocery store financing you need to keep customers shopping. We’ll walk you through your small business financing options and what small business loans will work best for you and your grocery store when you’re starting your business.

Whether you’ve sought out small business financing before or have some familiarity with the process, there’s a lot to know about getting one of the many grocery store business loans out there. Most owners are already busy maintaining their company’s daily business, which means that taking on the legwork required to get grocery store financing might feel like another major task to add to the to-do list.^[1]

Getting a small business loan doesn’t need to feel like a daunting exercise, however. Here’s how you can better understand your business’s finances, credit history, and what you intend to do with the money, so that you can make the process of getting grocery store financing much easier (and less time intensive).

If you have not already drawn up a business plan for your grocery store, getting yours in order is a great place to start—especially because you’ll need one as part of your business loan application process. A sustainable business plan enables lenders to determine how the business owners intend to operate their company, what kind of cash they need in order to get started, expected costs, and their long-term future plans for the company. A healthy business plan also enables you remain centered on your strategy, which will help you later on as your business grows.

The most crucial aspect of successfully running a business is making more revenue than you spend. Banks will want to know how successful your business is and what its financial health looks like for the future. Looking at your cash flow, revenue streams, and typical business expenses means keeping an eye on some of the most vital statistics that influence whether or not you qualify for the most attractive loans.

To get a good loan, you will have to demonstrate that your grocery store is a safe and lucrative use of their cash. They’ll want to have faith in their investment, and some degree of certainty that their money (plus interest) will be paid back. Having a knowledge of your business finances that you can commit to memory helps to make the bank’s approval processes run more efficiently, it will also go a long way in terms of leaving a good impression with your creditors.

Not every loan needs excellent credit on behalf of the borrower, but an attractive credit score never damages your odds of receiving funding for a grocery store or other small business. By understanding your personal credit history, as well as your business credit score, you’ll be able to arm yourself with some insights into which lenders are most likely to approve your loan, and what kind of interest rate you might receive.

One especially important factor to consider when looking for a grocery store business loan is the role of your personal credit in business loan approvals. Your own individual credit history plays a major part in what banks do to determine if your company is a good candidate for a small business loan. The same goes for any business partners or loan co-signers you have alongside you, so their credit scores and history should be as strong as possible.

Lenders will want to know more about your history with entrepreneurial endeavors, as this plays another vital role in the loan approval process. If you’ve started a successful business that’s been in operation for a few years or more, you’re likely to impress your lenders. A positive business track record can signal to lenders and banks that you’ve been able to navigate the challenges and decisions that come with operating a functional grocery store.

Much as personal credit plays a role in determining your business’s creditworthiness, so too does any prior business experience held by your partners in addition to yourself. If you’re bringing in a partner who has past or present success as an entrepreneur, this can help bolster your company’s chance at getting a loan—even if you’re a first-timer who may not have as much experience.

Not all expenses are the same. Neither are small business loans. In fact, there’s a wide variety of ways to finance a business out there. Many of them work better for borrowers depending on their motives for borrowing money in the first place. Be sure you understand why you need your loan and what you plan to do with it. This isn’t just prudent money advice—it’s going to be one of the first things your lender asks you during the approval process.

You might even save your business money in the long-run by knowing what you plan to do with the money. Some loans pay out a lump sum of cash to help businesses afford big projects, while others help cover the bills during cyclical swings. Other options can even help you pay for a brand new deli slicer, all while coming with different interest rates and terms depending on the loan you choose.

When you know exactly what your business financials are and how they look in the future, you’re that much closer to getting your loan approved. Then, you can focus on the pros and cons of each kind of grocery store loan.

You’ll want a loan that provides you with money and business-friendly terms that help you make the most of your financing. This may take the form of an SBA loan, bank term loan, equipment financing, or alternative lenders, depending on what you need. And if you’re not sure which of these is right for you already, we’ll help break down the differences between each of these business loans too.

Applying for a loan can feel like an intimidating, time-consuming task. And to a certain extent, it can be. How much time it takes, and how enjoyable the experience is, comes down to how well you’ve prepared yourself with research and supporting documents. The more you do your homework before the application process starts, the more likely you are to have all the materials you need at the ready.

We mentioned earlier how important it is to have a sturdy, up-to-date business plan on hand whenever you go looking for grocery store financing. This is one of the fundamental documents your lenders will look at when determining if you’re loan-worthy. Be sure that your business plan is current and reflects your present-day business model.

Be prepared to open up the books on not just your business, but yourself and any other co-signers or business partners. Lenders want to know as much as possible about a prospective borrower before opening the metaphorical vault, and this means that most of your personal financial information is up for review too. Having this information already at your disposal will make the small business loan application process that much smoother.

You’ll likely need other documents depending on the kind of loan you’re applying for, but there’s still one crucial document that lenders will want to see in nearly every application. That, in essence, is an explanation of why you want the loan in the first place. Detailing the financials behind your decision to seek a loan, as well as the benefit that this loan would give to your business’s future plans, can influence your candidacy. Make sure you include any positive business accomplishments of you and your partners, as these intangible factors can work in your favor too.

The loan application process may feel opaque and cruelly long for almost anyone. Business owners don’t always feel as though they understand just what goes into approving a loan application, too. Although it’s impossible to detail every step of the process, it can be important to keep a positive perspective on the whole thing. The SBA loan application process may seem like it takes forever, when in reality it’s the document-gathering element that usually takes the most amount of time. In other cases, you may get approved within a matter of hours.

The best thing you can do is understand the average wait time for your loan application decision. Don’t be afraid to keep the lines of communication open with your loan officer, either. If your business finds unexpected success or new business opportunities, your prospective lender will love to know all about them.

Starting your own venture can be just as much of a challenge as it is an exciting opportunity to do something new. Grocery stores may not be the easiest businesses to run, but they’re essential staples within any livable neighborhood. If you’re interested in opening a shop of your own, and need grocery store financing to make it happen, you’ve certainly got options. Know what your needs are for the money, and you’ll be on your way toward getting the money you need to keep your shelves stocked.

1. Ruralgrocery.org. “Rural Grocery Initiative“
2. SBA.gov. “The SBA Loan Guarantee Program: How it Works“