3 aspects to consider when financing your path to growth

As independent home improvement retailers strive to grow their businesses, one of the biggest hurdles they face is financing their goals and finding the assets needed to take their operations to the next level.

Hardware retail spoke with Brian Misenheimer, senior lender at Live Oak Bank, the nation’s leading Small Business Administration (SBA) lender by dollar volume*. With his extensive experience in the home improvement industry, Misenheimer shared invaluable information on how to finance growth as an independent.

Hardware retail (RH): What types of financing can small independent businesses obtain to grow their businesses?
Brian Misenheimer (BM): The world of financing offers a variety of options for independent retailers. These include traditional bank loans, SBA expansion loans or personal loans from friends or family members. However, optimizing your business’s cash flow is one of the most effective ways to drive growth. By managing your cash flow effectively, you can position yourself for advantageous financing and create expansion opportunities without relying solely on external loans.

RH: How does a retailer determine how much financing it will need?
BM: Having a business plan is crucial in all areas of business, especially in determining the amount of financing needed for growth. Creating this plan starts with deciding how you want to grow. Here are some examples to consider: Do you want to add inventory? Undertaking a renovation? Open an additional location? Once you have set your goals, you can meet with your trusted advisors, suppliers, and wholesaler to determine how much you will need to achieve those goals.

RH: What key questions should a retailer ask their lender?
BM: Before a retailer meets with a lender and asks questions, they need to get their finances in order, including projections and historical financial data. Having a well-articulated business plan with assumptions about projections will help paint a clear picture of what you are trying to accomplish and how you plan to do it.

A critical point that retailers should question is the loan structure. It seems like everyone’s first question is always about interest rates, but the structure beats rates almost every day of the week. Longer amortizations, interest-only charging periods, balloon payments, prepayment penalties, and loan covenants are just a few things to consider when comparing loan structures. Additionally, working with a lender who understands your industry can also be a game-changer.

Live Oak employs industry experts across various “verticals,” with Misenheimer serving as the leading lender in the home improvement space. Through Live Oak’s Home Improvement business line, retailers have access to dedicated underwriters, loan reconcilers and portfolio managers who understand the industry. For more information on business financing for independent hardware retailers, connect with Brian Misenheimer at [email protected] or to 571-217-3022.

* Data provided by the SBA reflects the highest 7(a) dollar volume in FY 2023.