With inventory financing, companies increase their available stock and pay back as it sells.
While being out of stock is a great sign you’ve developed a product consumers love, that silver lining doesn’t fully soften the blow of knowing you’ve missed out on available sales and revenue because there wasn’t enough stock to meet customer demand.
Similarly, if you have a purchase order from a big chain store — the golden ticket you’ve been working so hard toward — but don’t have the funds to produce the ordered goods, it can be a nightmare when you realize you’ll miss this opportunity to scale.
Inventory financing allows companies to produce inventory above what cash-on-hand would allow and prevents growth-killing scenarios like the above from halting the momentum of a growing company.
These are the five ways inventory financing help small businesses grow and resolve funding issues:
1. Prepare for busy sales seasons
June cash flow can look insufficient to fund inventory to meet holiday sales, but that doesn’t mean you shouldn’t prepare to meet holiday demand.
With inventory financing, businesses can fund production orders and pay as future inventory sells, allowing you to maximize holiday sales even when payment for production lands during a cash pinch.
2. Invest in growth areas without sacrificing production runs
It takes more than just products on a shelf to make a business run.
There are set expenses, but there are also equipment upgrades, marketing expenses, and other costs that rise as your business scales. Don’t choose between investing growth activities and producing inventory.
Use inventory funding to unlock cash tied to inventory purchases to invest in the areas you need for growth.
3. Overcome limited lines of credit and loans
Younger and smaller businesses unfortunately don’t often qualify for working capital that meets the full funding needs for inventory runs that seize opportunities.
Inventory financing allows these companies to pay for production runs and use the inventory produced as collateral to back the funding. As it sells, you issue payment to the funders.
4. Inject working capital into your business
By using tools like Kickfurther, you can use inventory as collateral for working capital that allows you to purchase additional products to sell. With greater inventory on hand, a brand is better prepared to fulfill incoming orders, which benefits purchase frequency and perception of the business.
5. No more waiting on invoiced payments to arrive in order to grow
Inventory financing permits the purchase of inventory on an as-needed basis, allowing you to take advantage of opportunities that quickly materialize but can’t always wait until invoice payments arrive. The flexibility to seize opportunities creates the nimbleness needed to maximize inventory of a hot product or fulfil a surprise purchase order. Scaling companies agree seizing opportunities is imperative for increasing sales.
For companies in growth mode, a direct line to increasing sales and revenue comes from producing enough inventory to meet market demand. Inventory funding enables companies to produce additional inventory without sacrificing needed spending on operations, marketing or equipment.
Sean De Clercq is the founder and CEO of Kickfurther. He started Kickfurther after the frustrating experience of trying to secure funding for his merchandising business. He has a significant background in supply chain and loves working with brands to help them improve margins, strengthen their supplier relationships and access growth capital.