Inventory financing helps you grow your sales and release tied-up assets, using existing funding to increase available inventory and payback later. Simply put, it enables you to manufacture beyond what your cash-on-hand would allow to exploit your growth momentum. This method is similar to lines of credit or commercial business loans.
Four ways inventory financing helps businesses
Inventory financing is a strategic resource helpful for multi-channel brands, retailers, distributors, wholesalers, and businesses with high seasonal demand. Below we discuss four ways you can grow your business with inventory financing.
Get ready for busy sales seasons
If you use manufacturing software to predict demand, you know exactly what your best selling products are and when exactly they sell most, be it Christmas, summer time, or Mother’s Day. Usually, manufacturers begin placing inventory orders for Christmas in June. But what if your cash flow until June isn’t enough?
With inventory financing, businesses in situations like these can prepare to successfully deliver for the holiday season. It enables businesses of all types and sizes to finance their production while paying back as future inventory sells.
Clearly, this solution is especially relevant for seasonal businesses that experience surges in sales. Inventory financing helps you maximize these high-sales seasons.
Invest in growth
Although the core of any manufacturing business, it takes more than available products on the shelf to make a business successful. One has to foresee variable costs too, such as equipment malfunctions, marketing expenses, the need to hire more people as the business scales, and so on.
Investing in growth is key to your business’ success. You must consider various growth initiatives, like expanding product lines, hiring additional help, enhanced marketing efforts, or expansion into new markets. Don’t choose between investing in growth activities and producing inventory.
Inventory financing puts you in a situation where you don’t have to choose between investing in growth and producing inventory. It unties cash you can invest in areas with high potential.
Avoid loans and lines of credit
Not all businesses qualify for traditional financing options. Especially if you’re at the beginning, even if you showed traction and successful operations, banks are hesitant to offer loans to new businesses.
Inventory financing allows you to fund your production and use the inventory manufactured as collateral to back the funding. As you sell your products, you issue payment back to the funders, releasing cash to manufacture with conditions based on natural sales cycles.
Inventory funding allows you to purchase inventory as needed. This means that you can exploit growth options without being held back by the lack of cash or worrying about delaying your plans until you cash your invoiced payments.
For scaling companies, it’s imperative to take advantage of opportunities to increase sales. Inventory financing allows peace of mine, enabling manufacturers to focus on what matters most: growing their business.