Every company can experience cash flow problems from time to time. However, these problems more pronounced in industries that provide products instead of services, like retail, wholesale, or food. For this reason, entrepreneurs are compelled to take out loans, specifically inventory financing.
An inventory loan, much like equipment loan, is a type of short-term loan that is granted to small business owners to help them stock up on inventory. In order to qualify, you must be in the industry long enough to secure a positive history of inventory purchase orders. Once you’ve secured the loan, the financial institutions would use your inventory as collateral in case you fail to pay your dues in time.
Small businesses can benefit from small business financing in the following ways:
1. Provides Additional Liquid Cash
Businesses are often challenged with meeting the day to day expenses. Most times, a gap can come between the amount needed for expenses and daily sales. Inventory financing helps entrepreneurs maintain positive cash flow in their company. They can use their inventory as leverage and turn it into assets which can help in obtaining short period loans.
2. Product Improvement
With the intensifying competition of certain business types, creating a unique product that stands out is vital. Entrepreneurs need to keep up with the latest trends to prevent missing out on increasing sales and attracting new customers. Applying for inventory financing can help you get the capital you need for producing the new products.
3. Keep Up With Seasonal Demands
A lot of seasonal businesses experience a decline in their product sales during a specific time of the year. For instance, a retail store that sells winter clothes could experience a slow time during the summer. But as the winter seasons draws close, they also need to stock up for inventory in preparation for their busiest time of the year. Inventory loans can help in financing when buying products ahead of time.
4. Helps with the Sales to Make Business Grow
If your business is in retail, you know how expensive it is to buy a product in large quantities. With inventory financing, you won’t have to worry about this problem since you’ll be equipped with the right funds. With your shelves stocked up at all times, your business will be able to meet the high demands of the customers. You may even get your products at a discount if you buy in bulk.
5. Prevents Cutting Costs on Some Areas
Businesses experiencing a slow time could cut up costs on some areas and focus purchasing inventory to meet the demands. As a result, some systems within the business could experience disruption. Inventory financing helps you stock up on products while allowing you to operate your business as usual.
Inventory Financing For Your Business
Inventory financing can be a great alternative to bank loans. With careful considerations, it can provide the answers you need to keep your businesses running. If you’re looking to apply for an inventory financing, SMB Compass might be able to help. With our years of experience, we want nothing more than to provide our clients with the best terms possible. Learn more about us today. Call us at (888) 853-8922 or email us at info@smbcompass.com.
Helpful article: https://www.investopedia.com/terms/i/inventory-financing.asp
This entry was posted on Wednesday, July 31st, 2019 at 3:54 am and is filed under Business, Inventory Financing. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.