Business Loans For Thrift Stores

Business Loans Thrift Store

With the environmentally-friendly sentiment of reusing and recycling, thrift stores have been popping up more and more across Canadian cities. If you’re interested in fashion and retail, a thrift store could be a great business idea for you. However, as with any business, owning a thrift store comes with a lot of work. This is why it’s so important to be aware of all the financing options and possible expenses you will need to consider before opening up your shop. 

Here are some tips on starting your business.

Business Loans For Thrift Stores

To get a business loan, your lender will look at a variety of criteria. This criteria changes in priority, however, depending on the type of lender you borrow from. Let’s take a look at your options for lenders for your business loan.


Banks offer the lowest interest rates for business loans, so they are often a desirable lender for borrowers. However, it is difficult to secure a business loan from a bank because they often have strict lending requirements. A bank will want to see that your business has been operating and bringing in revenue for at least 6 months. If not, they will be very observant and critical of other factors such as your credit score, savings and capital, and proof of income. If you have bad credit, you will be more likely to secure a loan from a different lender. 

Credit Unions

Credit unions tend to offer a more personal experience than banks because they are usually smaller. Their rates are comparable to banks if not lower, and they tend to be more lenient in their loan requirements. However, becoming a credit union member takes longer than most banks, and it will take even longer for a credit union to approve you for a loan, as they need more time to establish trust. 

Alternative Lenders 

If you have a low credit score and low savings, you may want to consider an alternative lender. This should only be considered if you are unable to receive financing from a bank or credit union because the interest rates with alternative lenders are much higher. The tradeoff is less strict requirements for obtaining the loan, which works in the favour of someone who has bad credit. 

Government Funding – Canada Small Business Financing Program

The Canada Small Business Financing Program (CSBFP) is a program that entails the Government of Canada sharing the financial risk when a lender provides a loan to a small business. With an eligibility amount of up to $1 million, borrowers can use the loan to renovate or update their commercial space and purchase new equipment. Like all loans, a fee and interest rate is decided, but can be negotiated by the lender and borrower. 

Learn more about the available government business financing programs.

Best Thrift Store Loan Providers in Canada

AmountAPRTerm (months)
SharpShooter Funding1k-300kFee-Based: Starting at 9%12- 60 Learn more
OnDeck5k-300k8% – 29% 6-18Learn more
Lending Loop1k-500k+5.9%3-60Learn more
Thinking CapitalUp to 300k8%-22%6-12 Learn more
Merchant Growth5k-500k-6-18Learn more
BDC100K +6.05% +60Learn more
IOU Financial5K-100k15%+12-18Learn more

What are the Eligibility Requirements For a Thrift Store Business Loan?

As described above, different lenders will place different weight on criteria for lending to a business. Some of the factors lenders look at are as followed:

Credit Score

Your credit score is your history of paying back debt. Most lenders will look at your credit score before deciding to lend to you. Your business also has its own credit score; however, for newer businesses, banks will look more heavily on your personal credit score

Bank Statements

Bank statements give lenders a general idea about your income and business revenue. The main reason lenders want to see your bank statements is because they want to verify if you have the funds necessary to cover the loan payments. 

Tax Returns

Tax returns give lenders the history of your business’ earnings over the last few years. It’s also important to note that while many entrepreneurs write off expenses, or deduct expenses from their income, to save money during tax season, this might backfire sometime if you want to show that your income is high. 

Sales Records

Sales records are supporting documents that help lenders see your business earnings if your bank statements or tax returns aren’t detailed enough. 

Business Plan

Your business plan is a document that describes everything about your business – expenses, financing, sales plans, market research, inventory pricing, and more. Your business plan should document your business goals and financial projections. 

Business Loan Checklist

What Expenses Can a Business Loan Help Your Thrift Store With? 

Although thrift stores have used and sometimes cheap clothing as inventory, this doesn’t mean that opening a shop won’t be expensive. Opening a thrift store comes with many expenses. Let’s take a look at some of the costs associated with opening a thrift store:

Rent and Utilities

Rent, especially if you are operating in a major city, will be your biggest expense. Account for a few thousand dollars per month for rent, and try to have a few months of rent saved up before jumping into your business. You will also need to account for utilities, like electricity and hydro, and other monthly costs such as phone bills and internet. It’s a good idea to budget a few hundred dollars a month for these bills. 

Check out how you can boost profits by reducing common business expenses.

Store Fixtures, Supplies and Décor

Your thrift store will need strong clothing racks to display all of the inventory, merchandise tagging equipment to indicate prices, as well as a cash register, cash float, and point-of-sale system to process payments. You may want to also consider shelving, glass cases, and lighting fixtures to better present your products. Finally, most retail stores could benefit from security cameras to deter stealing. Start looking at used options first, like online buy and sell platforms, or retail stores closing a location, as you can save money that way. 

Advertising, Marketing, and Signage

Getting the name of your store out to the public isn’t easy; however, advertising and marketing tactics can help you increase your popularity. Radio advertising and newspaper ads are one route to take, but experts say that they are not as effective as having a strong social media presence. Organic social media is a cost-effective way to market your store, specifically if you maintain your store’s social media accounts yourself. Signage is also important, but promoting on signs can cost prohibitive with a price tag of anywhere between $500-$1000.

Cleaning and Maintenance

To entice buyers to come into your store, you need to ensure that the commercial space is clean and well maintained. Customers won’t be as likely to buy clothing from you if it’s being held in a dirty bin. Account for nightly cleans and deeper cleans every so often to keep your space neat and tidy. Furthermore, you’ll want to budget for cleaning the actual products. Vintage clothing is used, so it’s important to wash all products before presenting them to the customer. 

Learn how to manage your small business inventory


Insurance provides you with the security you need for your commercial space and inventory, in the event of an accident or theft. Since each thrift store item is so unique and you won’t be likely to find the same product immediately, having insurance to cover damaged or stolen inventory can help offset the cost and delay of replacing it. 


Unless you plan on working in your thrift store alone, you’ll need to account for labour costs, or payroll, in your budget. Payroll costs also include wages, vacation time, insurance, and taxes. 

Learn how to set up payroll for your small business.

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Are There Other Ways to Finance Your Thrift Store Expenses? 

Apart from the classical business loan, there are a couple of other routes to take when financing your thrift store expenses. 

Merchant Cash Advance

Merchant cash advances give business owners an advance payment on future sales. So, if your projected sales for the year is $50,000, you can borrow a percentage of those sales (say 30%, for example), and pay it back through an agreed-upon payment every day that sales have been processed. There is also a predetermined fee and interest associated with a merchant cash advance. It’s important to keep organized records of sales, including all credit card receipts, so that you can keep track of your revenue and payments. 

Business Line of Credit

A business line of credit is also known as a revolving loan. This line of credit is a fixed amount of capital that can be accessed at any time to help small businesses with their expenses. They often have lower interest rates than credit cards and have more flexible timelines for repayment. 


Since acquiring inventory isn’t usually expensive for thrift store items, you might want to consider a microloan for smaller expenses. A microloan is a loan lent by a person rather than a bank with a low-interest rate, usually meant for new businesses

Equipment Loan

This particular loan can only be used to purchase equipment. However, you are more likely to be approved for an equipment loan than for a business loan. This is because the lender assumes a lower risk because the loan is covered by the equipment themselves. So, the equipment you buy with the loan acts as a defence to the risks normally associated with a lender lending money. 

Frequently Asked Questions

What is the difference between a business loan and a line of credit? Should I use a business loan or a line of credit? 

Lines of credits might seem similar to business loans at first glance; however, there are a few differences. Lenders will look at a business’ credit profile to decide on lending a loan, while lenders will look at a business’ credit performance to decide on lending a credit line that the business can access in the future. Furthermore, a loan is a fixed amount of money received by the borrower once the loan is approved, paid back on a monthly basis until the balance is fully paid. A line of credit is not used all at once, or at least it doesn’t have to be. Businesses have the flexibility to access their line of credit at different times, and to pay it back and use it again.

Can I get a business loan to start my thrift store? 

You can acquire a business loan to start your thrift store; however, it may not be realistic to assume that a bank will lend it to you. With most new businesses, acquiring financing is easier through a credit union or alternative lender because they are willing to offset the risk with a higher interest rate. Banks often have stricter requirements that make it difficult for a new small business to be approved for a loan. 

What factors should I consider when applying for a business loan? 

Some factors to consider when applying for a business loan are:
  • Interest rate. Is the interest paid each month in line with your budget and comparable to other similar lenders?
  • Term Length. Is the term length long enough to allow you to make your monthly payments? Or is it too long and will it cost you too much money in interest in the long run? Make sure your budget is accurate to account for the maximum monthly payments that you are capable of making – this way, you won’t sacrifice extra interest costs for a longer-term length. 
  • Lender. Is the lender reasonable to work with? Pay attention to their customer service skills, and make sure you conduct your own research to see what other borrowers’ experiences have been with this lender. 

How do I increase my chances of being approved for a business loan? 

There are a few ways to heighten your chances at being approved for a loan, including:
  • Improving your credit score
  • Having a strong business plan
  • Securing your loan with an asset
  • Comparing multiple lenders’ rates and getting quotes

Do I need a business plan to fund my thrift store? 

Although a business plan is not always requested by a lender, having a business plan is prudent for your own business planning, as well as for the lenders that will ask for it. Additionally, if you are a relatively new small business, a lender is likely to ask for a business plan. 

Final Thoughts

Although new thrift stores would prefer to use their own savings for financing, this is often not realistic for a new business owner. With many financing options to choose from,  and with careful planning, aspiring thrift store owners can successfully start their new venture. 

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