According to a 2020 report by the research company IBISWorld, the household furniture manufacturing industry contracted 7.1%, between 2015 and 2020. This report credits recent industry contractions to the COVID-19 pandemic and its economic consequences. Pandemic-related unemployment increases and discretionary spending reductions, according to the report, have slashed the industry’s demand.
It’s not all bad news – the report points to some potentially promising trends as well. Recovery from the economic crisis spurred by COVID-19 is expected to increase housing starts and new home sales, thus increasing demand for bedroom sets, couches, tables, and other items to outfit those new spaces.
On the other hand, as a furniture maker, you may see less revenue from this demand since millennials – a large portion of current home buyers – typically prefer low-cost furniture. And as you likely know, large furniture corporations have far more leeway than small furniture businesses such as your own to sell items at lower prices.
This reality places you in a uniquely competitive environment that small business loans for furniture makers can help you face. Below, learn more about low-cost funding options.
Funding challenges and opportunities for furniture makers
Many funding challenges that furniture makers face are not necessarily unique to the furniture industry. For example, lenders are known to balk at approving loans for borrowers in struggling industries – a description that fits many industries due to the COVID-19 pandemic. Other funding obstacles are more specific to the needs of furniture companies.
Compared to many other sectors, the furniture industry has a greater need for skilled workers. Specialized fields such as engineering and finance have a vast pool of recent college graduates from which to staff their teams, but furniture making is not as frequent a chosen profession, making furniture builders an in demand profession. As such, appropriately skilled workers for furniture companies can seem far and few between, so furniture makers may struggle to keep up in times of high demand. Lenders aware of this challenge may feel less inclined to approve small business loans for furniture makers, but funding remains possible via the routes below.
Financial options for furniture makers
Furniture makers can apply for SBA loans or look beyond the government for funding. No two small business loans for furniture makers will have quite the same rates and approval periods, but the below guidelines should give you a general idea of what to expect.
The SBA 7(a) loan program
Experts often consider low-cost SBA 7(a) loans the best small business funding option. These loans’ low rates, low monthly payments, and long terms are great for furniture makers who need to:
- Obtain Working Capital – Working capital is possibly the clearest indicator of your furniture company’s wellbeing. To calculate it, deduct your current liabilities from your current assets or determine how much cash your company has on hand.
If you have negative working capital, you should grow your assets through new equipment purchases, or new employee hires. SBA 7(a) loans are valid for both these purposes. - Consolidate Your Debts – SBA 7(a) debt consolidation loans can go toward refinancing your current small business loans. These include your furniture company’s merchant cash advances, high-interest business loans, daily or weekly payment loans, or short-term business loans.
- Buy Commercial Real Estate – If you plan to open a new studio for your furniture company, your SBA 7(a) loan can help. You can use it to buy owner-occupied commercial real estate or refinance your ongoing commercial real estate mortgages.
Advantages of SBA 7(a) loans for furniture makers
Lending experts see SBA 7(a) loans as the “gold standard” due to their affordable monthly payments and their wide use of funds. Other advantages include:
- 10-year terms (25 years for commercial real estate loans)
- Low rates
- No prepayment penalties
- Availability in all 50 states
Requirements for furniture makers to apply for SBA 7(a) loans
If you and your furniture company meet all the below requirements, you may qualify for SBA 7(a) loans:
- You must be a U.S. citizen or lawful permanent resident
- You must be at least 21 years old
- Your personal credit score must be above 650
- Your furniture company must be based in the U.S.
- Your life coaching company must be at least two years old
- You must have no foreclosures or bankruptcies in the last three years
- You and your company must be on-schedule with all government-related loan repayments
- Your company must have no tax liens, recent settlements, or outstanding charge-offs
Certain lenders may have additional requirements that others lack. For example, some loan providers ask for applicants’ business plans, but SmartBiz Loans does not.
How to apply for an SBA 7(a) loan for furniture makers
Step 1: Verify that you meet the above SBA 7(a) loan requirements. Learn more via the SmartBiz Loans page SBA Loan Requirements for Existing Businesses.
Step 2: Gather all your paperwork, and don’t hesitate to seek help from your accountant, bookkeeper, or another financial expert familiar with your furniture company. Read more via the SmartBiz Loans Guide to SBA Loans.
Step 3: Determine your lender based on the following factors:
Reviews
Browse your lender’s reviews on TrustPilot, Consumer Affairs, or Google. These reviews can tell you whether the lender is a good choice for you, as long as you’re reading reviews by real customers – double-check to be sure.
Fees
Your loan should include interest and repayment fees, and these should be the bulk of your fees. Excessive additional fees can be red flags, as can provisions about fees not due during your loan’s lifetime and before your loan’s funding.
Transparency
Your interest rates and APRs should be clearly stated. If not, you may be interacting with a lender who will never fully detail your loan terms. Not knowing all your loan terms could unintentionally saddle you with an unfavorable loan.
Obvious loan terms
To further ensure a favorable loan, check your loan’s fine print. Complicated fine print can obscure unfavorable payment schedules and loan costs, so don’t hesitate to inquire with your lender about prepayment penalties (if applicable), total loan amounts, payment amounts and frequency, and collateral requirements. If your lender gives you vague or incomplete answers, find your funding elsewhere.
Availability
Even the best loans may fail to fully please you if your lender is often unreachable. Choose a lender that assigns you a regularly reachable representative who knows your company, application and the furniture industry in and out.
The SBA 504 loan program
The SBA 504 loan program offers low-cost modernization or expansion funding to qualifying small businesses. You can use SBA 504 loans to upgrade your equipment, purchase commercial real estate, or expand your team.
You can obtain additional funding if your furniture company meets the public policy goals of your local community development corporation (CDC). In this case, your SBA 504 loan can cover as much as 50% of your project costs, and your CDC can cover up to 40%, leaving you with just 10%.
The SBA microloan program
If your furniture company qualifies as a very small business (a.k.a. microbusiness) under the SBA’s guidelines, you can apply for the SBA Microloan Program. SBA microloans are at most $50,000, and you can use them for all business needs except debt payments and commercial real estate purchases.
Non-SBA loans and other funding options
Although SBA loans are usually the best way to obtain small business loans for furniture makers, you have other funding options as well. These funding routes may have higher rates, larger payments, and shorter terms than SBA loans. They include:
Bank term loans
Through bank term loans, you can obtain funding as quickly as with SBA loans. And like SBA loans, bank term loans can cover your debt refinancing or working capital costs. However, you should always ask bank term lenders for clear explanations of loan rates, repayment terms, amounts, and prepayment penalties, as all these factors may be less favorable with bank term loans than with SBA loans.
Merchant cash advances
You may qualify for a merchant cash advance (MCA) if your furniture company accepts credit or debit card payments. MCAs are lump-sum loans that card providers give you. You repay them by funneling a small amount of all transactions back to the provider. If you prefer traditional installment-based payment plans, those are possible as well.
Although you might not have to think twice about repaying MCAs, their extremely high APRs aren’t quite as convenient. Learn more about MCAs via the SmartBiz Loans blog What You Need to Know About an MCA.
Business lines of credit
Business lines of credit are revolving credit lines of a maximum amount proportional to your credit score. This amount is usually less than what you would receive through bank term loans, but unlike with bank term loans, you don’t have to use your entire loan. Using only the funds you need may actually be smarter since you don’t pay interest on money you don’t spend.
You can access your business line of credit as frequently or infrequently as needed until you run out of funds. Additionally, business lines of credit rarely have the same collateral requirements as other loan types, so they may be safer for your furniture company. Learn more via the SmartBiz Loans blog Small Business Lines of Credit Pros and Cons.
Although both business lines of credit and business credit cards are revolving lines of credit, only business credit cards can be reused after you max them out. Additionally, many business credit cards give you spending rewards, which business lines of credit do not. Read more at the SmartBiz Loans blog Finding the Right Credit Card for Your Small Business.
Furniture Maker Funding Success Story
Kelly Aaron is the co-owner of Blueprint Lighting, a lighting fixture company based in New York. Kelly came to SmartBiz Loans after previously using small working capital loans and being denied a $50,000 loan by her business bank. She used the SBA loan that SmartBiz Loans obtained for her to bring on a third-party PR company, hire two new employees, and travel for Q&As, meet and greets, and other efforts to expand into wholesale.
“The money is giving us the freedom to make solid decisions in a timely way,” Kelly says. “It’s a big difference for us.”
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.
