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How to Grow with Inventory Financing

If you have product flying off the shelves, congratulations! Establishing demand is one of the most challenging aspects of business.

But if you have products flying off the shelves, and you’re not replenishing them, you could be in trouble. Today we’re going to talk about how inventory financing can help your business prevent out of stocks, help operations run smoother, and fund your growth initiatives.

Inventory issues cost retailers trillions of dollars in lost revenue per year, yet the out of stock rate continues to hover around 8 percent. Luckily, banks and lenders offer ways for you to leverage your existing inventory into working capital. Inventory financing can help your business grow in a ton of different situations.

Here are a few of the most common scenarios where clever use of inventory financing can accelerate growth.

Maximizing revenue

You need revenue to grow, and you need inventory to earn revenue. Being out of stock can hurt your business in so many ways:

  • With tons of options to purchase, consumers won’t wait for your inventory to arrive—they’ll just go somewhere else, or pick a competing brand. What’s worse, you run the risk of being remembered as the store that didn’t have what they wanted or being accused of advertising a loss leader.
  • Out of stock can throw off your business intelligence efforts. Without sales data to draw from, you can’t make informed decisions about demand and purchase patterns.
  • Analyzing your performance while accounting for out of stocks is more complicated, burning time, and possibly, payroll.
  • It’s hard to attract new customers while out of stock, not to mention annoying your existing clientele.

Fixing your out of stock problem can be expensive, but not nearly as expensive as not fixing it. Proper inventory planning is an absolute necessity for a successful business. If cash flow is your issue, inventory financing can be a quick-and-easy solution.

Supplementing off-season months

Seasonal business can really struggle in off months to bring in revenue and maintain a steady cash flow. Cash flow issues have a way of affecting every part of your business, and they should be avoided whenever possible.

One solution is to use your inventory to get an asset-based loan to cover your expenses during the slow months. While this may not be an optimal long-term solution, it can keep your business running while you figure out where your real problems are.

Getting funding when traditional methods fail

Most banks aren’t exactly lining up to fund companies with cash flow issues, poor credit history, or that are just too small to be profitable for the bank. Ironically, these problems are not necessarily the signs of a weak or failing business. Inventory financing provides a viable option for an asset-based loan when the traditional approach to financing won’t work.

To reiterate, using inventory financing does not mean that a business is failing or running poorly—when used properly, inventory financing can be a smarter way to grow. By leveraging your inventory and maximizing profits, you can start planning your second location, hire more staff, or expand into e-commerce.