Small Business Loans for Bookstores

Although U.S. bookstores brought in $10 billion in 2019, this revenue does not accurately reflect the hardships that bookstores have endured. Between 2015 and 2020, the bookstore industry contracted 6.6%. This decrease did not occur due to decreased interest in reading; in fact, book sales increased 5% from 2019 to 2020. Instead, this decline stems from consumers increasingly turning to online book retailers for a quick and convenient shopping experience.

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The COVID-19 pandemic only accelerated the move to online book purchases as more consumers stayed home, and some bookstores faced limitations on operations or outright closures. This shift emerged during a time when bookstores were already struggling.

If your bottom line has been impacted by any of these changes, small business loans for bookstores can help pull you in the right direction. Below, learn about low-cost funding options for your bookstore.

Financing Options for Established Bookstores During the COVID-19 Coronavirus Pandemic

In March 2020, the U.S. federal government began enacting major legislation in response to the COVID-19 pandemic and the attendant financial crisis. From this, the CARES Act, which includes the Paycheck Protection Program (PPP), was set into motion. With these new Small Business Administration (SBA) loans, small businesses such as bookstores can gain additional funds to help mitigate the effects of the ongoing economic emergency. PPP loans can also help small business owners expand their operations.

After the closure of the first round of PPP loans on August 8, 2020, the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act (the “Act”) enacted a second round of funding that opened to small businesses in January 2021. The funds acquired by small business owners during the second PPP round allow loan use toward costs not covered in the previous round, which concentrated mainly on payroll costs.

To learn more about applying for and using PPP loans, read the following SmartBiz Loans articles:

Additionally, the SmartBiz Small Business Blog will also be updated regularly with the latest information on loan opportunities and forgiveness, as will the SmartBiz Loans COVID-19 information center.

Applying for a first or second PPP loan in 2021

The SmartBiz streamlined PPP Loan application can help you fill out your application, upload required documents, and submit them to the bank quickly.**

SmartBiz can help you apply for these funds. We have specialized in SBA loans since 2013 and our network of banks has funded nearly $4 billion in SBA, PPP, and bank term loans.

Whether this is your first or second PPP loan, SmartBiz can help! Businesses with less than 500 employees that are negatively impacted by the pandemic can apply for their first PPP loan.

Start an application today here: PPP Loan Application

The program expires on May 31, 2021. No applications will be accepted after that date. Keep an eye on the SmartBiz Small Business Blog for updated information about an extension if approved by congress.

Funding challenges and opportunities for bookstores

Many small business owners, bookstores included, are facing significant economic challenges and are subsequently seeking funding. For example, many small businesses may not look for loans until they lose revenue, but it can be harder to obtain loans when your financials are not as strong. Furthermore, first-time business owners in all sectors -- bookstores included -- may have trouble securing a loan or funding.

Nevertheless, some lenders may believe that approving bookstores for small business loans may ultimately prove beneficial. This is largely due to the increase in reading frequency and reading physical books rather than e-books. In fact, a recent survey found that 65% of adults prefer physical books.

Many bookstores are also trying to keep up with online retailers by offering online shopping right through their own website – a trend that may continue long after the pandemic. As such, bookstores with plans to extend their online services may be more likely to turn a profit, thus providing lenders with an incentive to approve them. Below, learn about the various types of funding for which a lender might approve your bookstore.

Funding options for bookstores

SBA loans or non-government sources are both options for bookstores to secure small business funding. Rates and periods will vary for each small business loan, but the following guide should help give you a general overview of what to anticipate.

The SBA 7(a) loan program

Countless small business funding experts favor low-cost SBA 7(a) loans for bookstores over any other type of loan. Bookstores will benefit from these loans’ low rates, low monthly payments, and long terms. With SBA 7(a) loans, you can:

  • Obtain Working Capital – The success of your bookstore is greatly dependent on working capital. Your working capital can be calculated by deducting your current liabilities from your current assets or determining how much cash is immediately available for your business. If you find that your working capital is negative, this means you must grow your assets. One way to accomplish this is by using your SBA 7(a) loan to purchase new equipment or hire additional employees.
  • Consolidate Your Debts – SBA 7(a) debt consolidation loans can help you refinance your current small business loans. These loans apply to merchant cash advances, high-interest business loans, and weekly or daily payment loans as well as short-term business loans.
  • Purchase Commercial Real Estate – If you’re thinking about expanding your bookstore by opening a new location or office, you can sort your owner-occupied commercial real estate purchases with your SBA 7(a) loan proceeds. Additionally, your current commercial real estate mortgages can also be refinanced with your SBA 7(a) loan.

Advantages of SBA 7(a) loans for bookstores

Almost all funding specialists say that SBA 7(a) loans are the “gold standard” for small business lending. SBA 7(a) loans are so highly valued because of their:

  • Low rates
  • 10-year terms (25 years for commercial real estate loans)
  • Availability in all 50 states
  • Wide use of funds
  • Lack of prepayment penalties
  • Affordable monthly payments

Requirements for bookstore owners to apply for SBA 7(a) loans

The below list of requirements must be met for you and your bookstore to obtain an SBA 7(a) loan:

  • You must be a U.S. citizen or lawful permanent resident
  • Your bookstore must be based in the U.S.
  • You must be at least 21 years of age
  • Your bookstore must be at least two years old
  • You must not have any foreclosures or bankruptcies in the last three years
  • Your bookstore must not have any tax liens, recent settlements, or outstanding charge-offs
  • You and your bookstore must be on-schedule with all government-related loan repayments
  • Your personal credit score must be at least 650

Depending on which lender you choose, you may face some additional requirements. SmartBiz Loans, for example, does not insist on seeing business plans from its potential borrowers, whereas many lenders do impose this requirement.

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How to apply for an SBA 7(a) loan for bookstores

Step 1: Certify that you and your bookstore meet all the requirements stated above prior to applying for SBA 7(a) loans. Read the SmartBiz Loans guide to SBA Loan Requirements for Existing Businesses to learn more.

To discover how your business financials stack up for funding, use our easy-to-use online tool. SmartBiz Advisor™ helps you track the financial health of your business and learn how banks typically evaluate your business.* SmartBiz Advisor also recommends ways to help you improve your credit and strengthen the financial health of your business as needed. Read feedback from real SmartBiz Advisor users and sign up here.*

Step 2: Gather all necessary paperwork and ask for assistance by reaching out to your bookkeeper, accountant, or another source of financial expertise. For additional information, visit the SmartBiz Loans Guide to SBA Loans.

Step 3:  Use the below suggestions to aid you in your selection of a lender:

Reviews

Learn more about your lender by reading their reviews on Consumer Affairs, TrustPilot, and Google. Real reviews from actual customers can help you decide whether the lender will be a good fit for you and your bookstore. Check to ensure that the evaluations you’re seeing are written by legitimate borrowers, and try to find reviews from other bookstores – their experience will likely be most applicable to yours.

Availability

Regardless of whether your loan terms leave you confused or perfectly satisfied, you should be able to reach out and talk with your lending company. If you find yourself having difficulty reaching your lending representative via email or phone, this is a red flag – consider finding a new lender. Your designated representative should also be well-versed in the bookstore industry and the details of your application and business.

Transparency

Check your loan terms and agreement for explicitly stated APRs and interest rates. If these figures are hard to find or understand, your lender may be trying to avoid disclosing your loan terms in detail. Avoid frustration and hidden provisions that don’t satisfy your needs by knowing these figures right from the start.

Obvious loan terms

Your loan’s fine print should be easy to understand. Don’t be afraid to ask your lender about your potential payment amounts and frequency, prepayment penalties, collateral requirements, and total loan amounts – complex fine print often hides these and other unfavorable loan costs. Consider looking elsewhere for a loan if your lender gives you an unsatisfactory answer.

Fees

Loans almost always consist of interest fees and repayment, but having multiple additional fees can be worrisome. Should you find several extra fees in your loan, consider switching lenders. You should also double-check that all your loan fees are due during your loan’s lifetime and before your loan’s funding.

The SBA 504 loan program

The SBA 504 loan program can assist small businesses in securing low-cost modernization or expansion funding. Using the proceeds from your SBA 504 loan, you can upgrade your equipment, employ additional staff, and open an additional location for your bookstore.

SBA 504 loans can be incredibly advantageous if your bookstore aligns with the public policy goals of your local community development corporation (CDC). As much as 90% of your modernization and expansion costs may be covered by your SBA 504 and CDC (at most 50% from your SBA 504 loan and at most 40% from your CDC) should you be in this situation. Your only pressing obligation would be the out-of-pocket costs for the remainder of the project.

The SBA microloan program

Your bookstore can apply for the SBA Microloan Program if your company is a very small business (a.k.a. microbusiness) according to the SBA. Microloans, which are at most $50,000, can be used for all business costs except commercial real estate purchases and debt payments.

Non-SBA loans and other funding options

Although there are other options available for small business funding, SBA 7(a) loans are most likely your wisest choice. Alternatives to SBA 7(a) loans typically have higher rates, shorter terms, and larger payments. These alternatives include:

Bank term loans

Bank term loans can be an acceptable choice if your bookstore doesn’t qualify for SBA loans, as these loans can supply funding just as rapidly as can SBA loans. Both loan types allow for working capital purchases or debt refinancing, though their repayment terms, prepayment penalties, loan rates, and amounts vary. Contact your loan provider with any questions you have to learn more about these provisions.

Business lines of credit

Business lines of credit are typically lower than bank term loan amounts, and their maximum amounts are proportional to your credit score. Another distinction between business lines of credit and bank term loans: You are required to use all your funds with the latter. Additionally, only the latter calls for interest payments on your entire loan – you’ll only have to worry about paying interest on the portion of your business credit line that you use.

You can use your business line of credit as often as you wish until your funds run out. Business lines of credit seldom have the collateral requirements of other loans, making them potentially favorable for bookstores. To find out more, visit the SmartBiz Loans blog Small Business Lines of Credit Pros and Cons.

Business credit cards and business lines of credit may seem similar, but they are not interchangeable. For example, business lines of credit fully expire when maxed out, whereas you can resume using your business credit card as soon as you repay your loans. Additionally, business lines of credit don’t offer the spending rewards that many business credit cards provide. Read the blog Finding the Right Credit Card for Your Small Business via SmartBiz Loans for more information.

Merchant cash advances

If your bookstore welcomes debit or credit card payments, you will presumably be able to apply for merchant cash advances (MCAs). These loans allow you to repay your loan by setting aside a small portion of every single card transaction and incrementally sending these sums to your card provider. Traditional installment-based payment plans are also available upon request.

Although business owners may appreciate the convenience of MCAs, this ease can conceal MCAs’ exceedingly high APRs. For further details, read the SmartBiz Loans blog What You Need to Know About an MCA.

Why Choose SmartBiz Loans?

Need funding to rebuild your business? Don’t waste time going from bank-to-bank filling out multiple applications. SmartBiz helps you find the best financing for your unique needs whether that’s an SBA loan, Bank Term loan, or other financing.  About 90% of qualified applications we refer to banks are funded and our financial professionals are on hand to answer your questions. Discover if you’re pre-qualified here without impacting your credit scores** and read the SmartBiz 5-star customer service reviews on TrustPilot.

 *The information provided through SmartBiz Advisor, including the Loan Ready Score, is for educational purposes only. SmartBiz Advisor is not a financial or legal advisor as defined under federal or state law. Use of this information is not a replacement for personal, professional advice or assistance regarding your finances or credit history.

**We conduct a soft credit pull that will not affect your credit score. However, in processing your loan application, the lenders with whom we work will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and happens after your application is in the funding process and matched with a lender who is likely to fund your loan.

 What you need to know: The information provided through SmartBiz® University and the articles contained therein are for educational purposes only. Use of this information is not a replacement for personal, professional advice or assistance regarding your finances or credit history.