Small Business Loans for Grocery Stores

In 2019, U.S. grocery stores generated $682.86 billion in sales. However, this growth is not necessarily good news for independent grocery stores and smaller chains. The grocery industry comprises approximately five times as many large corporations as small businesses, with a single grocery store corporation alone accounting for over $100 billion of the industry’s sales in 2017.

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The COVID-19 pandemic has made small grocers’ circumstances even more challenging, from stressed supply chains to decreased in-person shopping, even though grocery stores are considered essential businesses and therefore remain open nationwide during the COVID-19 pandemic. While the industry as a whole is growing (albeit slowly), consumer demand for higher-end products that grocery stores sell is expected to drop amidst the pandemic’s economic effects, dealing another blow to the industry. With all these factors at play, now may be the right time for a small grocery store to seek out funding to keep up with customer expectations and reach new shoppers. Below, learn how to find low-cost funding options.

Financing Options for Established Grocery Stores During the COVID-19 Coronavirus Pandemic

Amidst rapidly rising COVID-19 case rates in March 2020, Congress and the White House signed the CARES Act into law. This bill launched the Paycheck Protection Program (PPP), a new Small Business Administration (SBA) 7(a) loan program through which grocery stores and other small businesses could apply for growth or stabilization funding.

To stay updated, visit the SmartBiz Small Business Blog, where you can also find information on loan forgiveness and opportunities. You can also visit the SmartBiz Loans COVID-19 information center, Small Business Loans & Resources in Times of Coronavirus (COVID-19) for information on how to use your PPP loans.

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.

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 grocery stores

Some challenges related to funding your grocery store are shared among businesses in all industries. For example, lenders may hesitate to approve borrowers from industries experiencing slower growth or earning less revenue during the COVID-19 pandemic. Other challenges are unique to the grocery industry. The overwhelming prevalence of larger chains in the industry may cause lenders to question whether small grocery stores will succeed, as may the fact that grocery stores are typically low-margin businesses.

On the other hand, grocery stores may make sense for some lenders to fund. Food is a basic human need, so it is unlikely that a grocery store would struggle to find customers, especially if opened in a rural area, smaller neighborhood, or a “food desert”. And in these food deserts and some rural areas, some institutions provide grocery stores with resources for success, though these resources don’t always include funding. For that purpose, you can turn to the below financial options.

Financial options for grocery stores

Small business loans for grocery stores can come from the SBA or several non-government sources. No two funding options will have exactly the same approval rates and periods, but the below guidelines should give you a sense of what to expect.

The SBA 7(a) loan program

Many lending experts consider low-cost SBA 7(a) loans the best option for small businesses, including grocery stores. Their low rates, low monthly payments, and long terms make them ideal for your needs. You can use your SBA 7(a) loans toward:

  • Working Capital Working capital is perhaps the best indicator of your grocery store’s financial wellbeing. You can determine it by subtracting your current liabilities from your current assets or counting how much cash your grocery store has on hand.
    If you find that you have negative working capital, then you should grow your assets. You can do so by purchasing new equipment and hiring more employees. SBA 7(a) loans can be put toward all working capital purchases.
  • Debt Consolidation – Through SBA 7(a) debt consolidation loans, you can refinance your current merchant cash advances, high-interest business loans, daily or weekly payment loans, or short-term business loans.
  • Commercial Real Estate – If you plan to open a second location for your grocery brand, you can use your SBA 7(a) loan to cover your expenses. SBA 7(a) loans can go toward refinancing your current commercial real estate mortgages or buying new owner-occupied commercial real estate.

Advantages of SBA 7(a) loans for grocery stores

SBA 7(a) loans are widely viewed as the “gold standard.” That’s in part due to their wide use of funds and lack of prepayment penalties. Other reasons include their:

  • 10-year terms (25 years for commercial real estate loans)
  • Low rates
  • Affordable monthly payments
  • Availability in all 50 states

Requirements for grocery stores to apply for SBA 7(a) loans

You and your grocery store must meet all of the following requirements to qualify for SBA 7(a) loans:

  • Your grocery store must be based in the U.S.
  • You must be a U.S. citizen or lawful permanent resident
  • Your personal credit score must be above 650
  • You must be at least 21 years old
  • Your grocery store must have no recent settlements, tax liens, or outstanding charge-offs
  • Your grocery store must be at least two years old
  • You and your store must be on-schedule with all government-related loan repayments
  • You must not have bankruptcies or foreclosures in the past three years

Some lenders will have additional requirements that others don’t implement. For example, some loan providers will ask for your business plan, but SmartBiz Loans will not.


How to apply for an SBA 7(a) loan for grocery stores

Step 1: Confirm that you and your grocery store qualify for SBA 7(a) loans as discussed above. Learn more via the SmartBiz Loans page SBA Loan Requirements for Existing Businesses.

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 your required paperwork. Since you might need to prepare a considerable amount of paperwork for your application, don’t hesitate to seek help from your bookkeeper, accountant, or another financial expert. Read the SmartBiz Loans Guide to SBA Loans to learn more.

Step 3:  Choose your lender. When deciding, prioritize the following factors:


Your loan should include interest and repayment fees but not many fees besides these. If you see too many other fees, you may want to choose a different lender. You should also check that all fees are due before your loan’s funding and during your loan’s lifetime.


If you don’t see clearly outlined interest rates and APRs, look for a different lender. A lender that attempts to obscure this information may neglect to properly detail your loan terms, so you could find yourself attached to a loan that causes more problems than it solves.

Clear fine print

As with your APRs and interest rates, your loan’s fine print should be straightforward. Complicated fine print can mask unfavorable payment schedules and loan costs, so always inquire about your total loan amount, collateral requirements, payment amounts and frequency, and any applicable prepayment penalties (there might be none). If you don’t get clear answers, seek small business loans for your grocery store elsewhere.


Find your lender on Google, Consumer Affairs, and TrustPilot, all of which should display plenty of customer reviews. Through these reviews, you can decide whether the lender fits your needs. Confirm that you’re reading reviews by real customers, and attempt to identify other grocery store owners among the reviewers.


Even the most favorable loan terms can lead to a poor borrowing experience if your lender doesn’t make its team quickly available to you for help. Choose a lender that assigns you a representative whom you can regularly reach by phone or email. Your representative should also have full knowledge of your company, application, and the grocery industry.

The SBA 504 loan program

The SBA 504 loan program connects small businesses, including grocery stores, with low-cost funding to be used for expansion or modernization. Use SBA 504 loans to open additional stores, expand your team, or upgrade your equipment.

Additionally, if your grocery store is aligned with the goals of your local community development corporation (CDC), your SBA 504 loan and CDC can together cover up to 90% of your modernization or expansion costs. Your SBA 504 loan will cover as much as 50%, and your CDC will cover as much as 40%, with only the remainder your responsibility.

The SBA microloan program

If your grocery store qualifies as a very small business (a.k.a. a microbusiness), you may be able to apply for the SBA Microloan Program. Microloans are at most $50,000 and can cover business needs except debts and commercial real estate purchases.

Non-SBA loans and other funding options

Although SBA loans are your best bet for small business funding, not all small businesses qualify for them. That’s why other options exist, though these funding routes may have shorter terms, larger payments, and higher rates. They include:

Bank term loans

Bank term loans share the rapid approval and funding periods of SBA loans and allow for working capital investments or debt refinancing. Ask lenders about their rates, prepayment penalties, repayment terms, and potential loan amounts, as these may vary significantly by lender.

Merchant cash advances

If your grocery store takes credit or debit card payments, merchant cash advances (MCAs) may be viable funding options. This form of small business funding allows you to borrow money from a card provider and repay your loan by sending small portions of all transactions back to the provider. Traditional monthly payment plans are also possible. No matter how you repay your loans, you will likely have extremely high APRs. Learn more via the SmartBiz Loans blog What You Need to Know About an MCA.

Business lines of credit

Business lines of credit are funding sources of an amount proportional to your credit score. They typically offer you less funding than you would receive through a bank term loan, but unlike bank term loans, they don’t require full use of all funds. In fact, you may fare better not using your entire line of credit since you only pay interest on the funds you do use.

You can dip into your business line of credit as often as needed until your funding runs out. You also won’t need to put up collateral in most cases. Learn more via the SmartBiz Loans blog Small Business Lines of Credit Pros and Cons.

Business lines of credit are revolving lines of credit, as are business credit cards. However, only business credit cards can be reused after you max them out. Additionally, only business credit cards have the potential to include spending rewards. Learn more via the SmartBiz Loans blog Finding the Right Credit Card for Your Small Business.

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.