Retail Sales Show Signs of Recovery: Is It Time to Expand or Renovate?

Although the overall U.S. retail sales figures remained mostly flat, upscale retailers saw a significant boost in sales for June 2012. Stores like Nordstrom's, Macy's and Saks Fifth Avenue enjoyed solid gains in sales spurred primarily by affluent shoppers in the mood to buy. A number of discount and low-cost retail outlets reported similar increases in sales, while mid-range retailers experienced flat or negative growth for the month. While economic experts still advise caution, these sales figures offer reason for optimism in the retail sector of the economy.

Renovations and expansions

For smaller retailers throughout the U.S., these signs of recovery may present new opportunities for renovating current locations and expanding into new areas. Interest rates remain low, allowing business owners to renovate and expand their retail businesses at what amount to bargain prices. However, money supplies are still tight throughout the economy; retail business owners may need a little extra help in locating funding to finance their expansion and renovation strategies.

Coming up with the collateral

Existing retail locations and shopping center properties can serve as collateral for the planned expansion or renovations. Typically, the properties in question must be owned outright by the company or must have significant accrued equity in order to provide sufficient collateral for business expansion and renovation loans. In the current economic climate, some traditional lenders may require lower loan-to-value ratios for commercial business loans. Retail borrowers may find alternative lending sources more flexible in terms of collateralization and funding for expansions and renovations.

Criteria for commercial development loans

Before making the initial business loan request, retailers should ensure that their financial affairs are in good order. Lenders consider two basic criteria when evaluating a business expansion loan application:

• Available collateral to secure the loan
• The retailer's ability to repay

For new property acquisitions, a desirable retail location may positively affect the lender's assessment of the loan application. These sought-after retail sites provide added security for the lending institution due to increased demand for high traffic areas in popular shopping venues.

Criteria for commercial development loans

According to the U.S. Small Business Administration, most lenders require extensive documentation along with the initial loan request. That documentation typically includes the following items:

• Business profile outlining the general nature of the business
• Business financial statements for the most recent three years of operations
• Personal financial statements and personal tax returns for owners, major shareholders and partners in the business
• Cash flow projections for the duration of the loan
• Accounts receivable statements
• Year-end fiscal balance sheets for the previous three years
• Business income tax returns

Proper presentation of these documents can have a significant impact on the final disposition of the loan application.

CNF Exchange can help retailers increase their chances of approval when seeking a business loan to expand into new territories or to renovate existing retail locations. Our innovative system provides a direct connection between lenders and business owners, and we provide the elite services that can make the difference between success and failure in the competitive business lending environment.

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