If you’re interested in an inventory loan, you’ve come to the right place. We’ll provide you with information about inventory loans, as well as how you could benefit from this type of financing.
What is an Inventory Loan?An inventory loan is a short-term loan or line of credit that is issued to small business owners to help them buy inventory. Since financial institutions often use inventory as collateral, they could request a history of inventory purchase orders. Thus, this type of loan is primarily issued to small businesses that have already been established, rather than to start-ups.
The Benefits of An Inventory LoanAn inventory loan can benefit small businesses in a variety of industries, specifically those in the retail, wholesale, and food service industries. There are five significant ways an inventory loan can benefit your small business:
1. Expand Product LinesAs a business owner, you know the importance of keeping up with your existing product lines. However, by only focusing on current lines, you could be missing an opportunity to offer additional products to your customers. Often when a customer purchases one product, they’ll also need a related, supporting item. For instance, if your business sells protein powder and dietary supplements, consider selling, energy drinks, protein bars, and water bottles. By adding new items to your repertoire, you could majorly increase sales. An inventory loan can provide you with the working capital you need to invest in these new product offerings!
2. Re-Order Popular InventoryA fear many business owners have is running out of a popular product, and not having the cash flow available to purchase more items. If you run out of a popular item, you could lose sales and cause your customers to turn to your competitors instead. An inventory loan can help you avoid being under-stocked, so you can always meet customers’ needs.
3. Buy in BulkIf you operate in the wholesale industry, you understand the need to purchase inventory in bulk. Unfortunately, placing large purchase orders can be expensive. An inventory loan can make operating your business less stressful by providing you with the funds you need to ensure your shelves and warehouses are fully stocked with necessary items.
4. No Need to Cut CostsPerhaps one of the most significant benefits of an inventory loan is that you won’t have to reduce costs from other areas of your business to purchase inventory. An inventory loan will provide you with the up-front financing you need to buy products while operating your business as usual.
5. Meet Seasonal DemandsMany businesses experience seasonal fluctuations in sales. Small business owners that operate a seasonal business can use an inventory loan to purchase products during slower times of the year. For instance, companies that sell swimsuits and pool supplies in states that experience cold winters see a decline in sales during the winter. However, to prepare for the spring and summer, the business will need to have cash available to buy inventory. Another example that most retail businesses can relate to is the influx of sales during the holiday season. An inventory loan can be used to purchase additional products in advance, so that you can meet demands when customers start their holiday shopping.
Next StepsIf you’re ready to pursue an inventory loan, answer these questions before applying. Being able to answer these questions can increase your chances of being approved for financing.
- How much inventory does my business need?
- Is there inventory my business needs, but can’t afford?
- How much money do I need to purchase inventory?