A Guide To Inventory Financing For Small Businesses

Availing small business funding is vital to running it successfully. Almost every business experiences cash flow problems. This becomes inevitable if customers pay bills very slowly. There may also arise unexpected expenses. Fortunately, several avenues are present where businesses can get liquid funds. Such options include accounts receivable financing, credit card financing, lines of credit, and traditional bank loans. If funds are desired by small retail businesses to purchase inventory, it is possible to avail inventory financing.

About Inventory Financing

It is considered to be a short-term loan or line of credit designed specifically to assist small business owners in purchasing inventory. Business inventory, both present and future, is used against the loan as collateral. You can surrender the same to the lender if you are unable to repay it back. Such inventory funding is rather stated to be the lifeline to running any business successfully. Businesses requiring extra cash in hand or facing a cash flow crunch use it to purchase inventory.

Who is Eligible for Inventory Financing?

Generally, existing businesses can benefit from inventory loans which are not meant for startup businesses. Lenders prefer to fund a company that has a good track record in inventory purchases. Only then will they accept company inventory in the form of collateral. Moreover, inventory lending is meant for product-oriented or retail businesses and not service-based businesses.

In case you have been applying for an inventory loan similar to other small business loans, you may seek platform and traditional lenders. Such lenders generally prefer businesses with excellent sales performance records. A business with strong sales combined with a solid sales performance track record gets more favors. An inventory credit line can be a better option. Well-established retailers can access easily financing or lines of credit to meet their marketing expenses. Rough patches can be detrimental to small business growth. This is where you can rely upon platform lenders who offer convenient, fast solutions to help overcome cash flow issues.

How Can An Inventory Credit Line Help Your Small Business?

An inventory credit line can prove to be useful for deriving essential small business funding. Turnaround time is also very quick. This allows you to buy inventory at the right time and opportunity. Such loans also enable you to consider inventory stock in advance as well as avoid unwanted situations. Retailers can avail better customer experience while generating repeat sales. Even seasonal businesses can gain from this funding source. Using funds derived from inventory loans, you can buy desired inventory before the start of peak season. Then repay it with interest in a short turnaround time. Retail owners can be more adaptable and flexible to sales opportunities.

Ways Small Businesses Can Benefit From Inventory Financing Source

Small service-based businesses can avail of such loans and improve their operations.

1. Businesses that have earlier been rejected for traditional loans can apply for inventory loans. Inventory can be used as collateral if your business lacks cash or has poor credit or collateral.

2. Helps maintain fully-stocked display and storeroom units: Customers are likely to get disappointed and move to a competitor if they do not get their desired items. Sold-out or under-stocked inventory will only mean lost sales and opportunities. It will also mean that missed-out customers will not return or provide bad online reviews about your business. Hence, with inventory loans, you can keep your store shelves well stocked and also meet marketing expenses.

3. Wholesalers can use it to stock larger inventory amounts in warehouses. Without cash, larger wholesalers will find it tough to replenish supply. A reliable cash source will be necessary to buy additional inventory and fulfill future orders.

Thus, inventory financing can prove to be a boon for your small business and help take it to the next level.