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Why You Should Use Working Capital to Pay for Small Business Inventory
July 03, 2017
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Why You Should Use Working Capital to Pay for Small Business Inventory

Customers are the lifeblood of your business. They choose to purchase your products or services over a competitor’s offerings for a myriad of reasons including quality, price, uniqueness and availability.

As a business owner, you must keep up with your customer demands to remain competitive in your industry. One way to do so is to closely monitor your small business inventory to ensure you always have what your customers are looking for on-hand. Stocking up on inventory can be costly, but utilizing the additional working capital that you have received to purchase required products will ensure that your customers will never leave empty handed.

There are potential inventory dilemmas your business could face if you do not regularly monitor customer needs and inventory levels. In this post, we’ll explain why you should use the additional working capital you’ve received to pay for inventory, so that you can avoid these three issues.

1. Don’t Risk Being Under-Stocked

What happens when a customer comes to your store and finds an empty shelf where their intended purchase should be? According to the Harvard Business Review, upwards of 43 percent of your customers will simply leave and go to a competitor to purchase a product when you don’t have it. Having your customers leave you for a competitor is the last thing you want.

This can easily happen in any retail setting, but it’s also something to consider as a restaurant owner.  Imagine a customer comes in with a specific craving and you have run out of a popular menu item. Nothing disappoints a hungry customer more than telling them an item on the menu is no longer available because you ran out of the ingredients. Your customer will leave feeling disappointed, and may not return, or worse, tell others about their disappointing experience. With your small business inventory loan, you can stock up on your ingredient inventory to keep up with consumer cravings!

2. Seasonal Demand Fluctuations

Many businesses face seasonal fluctuations in sales. For example, the holiday season is a time when consumers across the country are shopping significantly more than any other time of year. You will want to ensure you have the products available in your small business inventory to keep up with this influx in sales. This means purchasing bulk inventory in advance of the busy season so you don’t completely run out when your products start flying off the shelves. It can be expensive purchasing a large volume of products at once in anticipation of strong consumer demand, but a business inventory loan can help.

Since you’ve already received a business loan, you’ll have the funds required to purchase the inventory, so you won’t have to worry about decreasing spending on other areas of your business.

The takeaway here is that you should invest the time and money needed to focus on your small business inventory management process, to ensure accurate predictions in seasonal fluctuations in customer demand.

3. Address Product Gaps

Not only do you need to keep up with the inventory of your existing product lines, have you ever considered you may be missing an opportunity to offer additional products to your customers that relate to your current offerings? Often when people buy one product, they are likely in need of other complementary products. How would this affect your small business? For example, maybe you sell specialty coffee beans. Perhaps consider also selling coffee bean grinders, percolators and mugs. Selling these additional products that your customers are likely in the market for will position you as a one-stop shop and ultimately increase your overall sales. Since you’re already received additional working capital, you can easily invest in adding products to your business’s repertoire.

Understanding your customers and their purchasing habits will enable you to better maintain your product levels, so that customers don’t leave empty handed. Effective small business inventory management is the key to satisfying customers and ensuring the longevity of your operations. If you’ve already received a working capital loan, contemplate using it to improve your existing inventory selection. It could be the factor that sets your business apart from the rest!

Fora Financial

Editorial Note: Any opinions, analyses, reviews or recommendations expressed in this article are those of the author's alone, and have not been reviewed, approved, or otherwise endorsed by any of these entities.

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Fora Financial is a working capital provider to small business owners nationwide. In addition, the Fora Financial team provides educational information to the small business community through their blog, which covers topics such as business financing, marketing, technology, and much more. If you’d like to see a topic covered on the Fora Financial blog, or want to submit a guest post, please email us at [email protected].
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