Whether you’re a startup, a seasonal business, or an Amazon eCommerce store, leveraging your inventory is a great way to acquire additional funding. For product-oriented businesses, it’s important to make sure that you have access to extra capital to be able to ramp up production in case you experience a sudden surge in demand. But when cash flow is tight and tied up in inventory, how can you seize significant business opportunities?
The good news is that there are a plethora of financing options out there that enable businesses to secure enough funding and meet customer demand. One such financing option is inventory financing.
What is inventory financing?
As a business owner, inventory financing provides you with another channel to obtain additional cash for inventory purchases without having to reallocate funds from other aspects of your operation. From production to shipping and logistics, an extra injection of cash means businesses will be able to produce more goods without compromising the quality of their products. Through inventory financing, businesses can purchase the inventory that they need and scale their growth to accommodate new markets and explore new channels. The same goes for Amazon eCommerce businesses.
What are the different types of inventory financing?
As mentioned above, there are several financing options that businesses can use to ensure that their inventory is in tip-top shape. When it comes to inventory financing, there are two main types to consider: term loans and lines of credit.
- Inventory loan – An inventory loan, or simply a term loan, is a financial product that is based on the appraised value of your inventory. Just like a regular loan, an inventory loan provides businesses with a set amount and is paid back over a fixed repayment term. However, it’s important to note that you will never get 100% of the appraised value of your inventory. Rather, expect to receive at least 50%.
- Inventory line of credit – As opposed to an inventory loan, an inventory line of credit can provide your business with extra cash on an ongoing basis. Similar to a business credit card, an inventory line of credit is a revolving line of funding that you can access as you see fit to keep your shelves stocked. This form of short-term financing is a great way for businesses to purchase the inventory they need, when they need it.
At the end of the day, there’s no one-size-fits-all approach when choosing an inventory financing option. Regardless of the type of financing you choose, you need to maximize it through the use of an Amazon inventory management strategy.
Inventory Financing Loans: Here’s How to Grow Your Amazon Business
Growing your business is an overwhelming task – more so without the right amount of capital. When paired with a great inventory management strategy, inventory financing can help your business reach new heights. More often than not, inventory financing is used by small to medium-sized businesses that have exhausted other efforts to secure traditional financing products.
Retailers, wholesalers, seasonal businesses, and eCommerce businesses (such as Amazon businesses) apply for inventory financing loans to purchase a significant amount of goods for resale. This cash injection also gives businesses an opportunity to save money by taking advantage of bulk discounts.
This kind of financing is beneficial for companies that need to pay their supplier right away without waiting for their products to sell. It can also help businesses expand their product lines and keep their bestsellers on hand – increasing customer satisfaction.
How can inventory financing help grow your Amazon business?
Growing an Amazon business involves driving traffic to your online store, expanding your reach, and securing enough financing to sustain your business operations. With inventory financing, you can purchase the inventory you need without sacrificing growth opportunities that would lead to more sales. If you’re wondering about the other ways that inventory financing can help grow your business, we compiled some of them below. Read on to find out more!
- Meet demand during busy sales seasons
- If your business is running low on inventory during busy sales seasons, then it’s important to have accessible financing options to make sure you meet customer demand. Inventory financing can help you break out of your cash flow woes by equipping you with enough cash to purchase additional inventory for your Amazon store.
- Leverage inventory to acquire additional financing
- Compared to other traditional loans, one of the greatest things about inventory financing is that it doesn’t require personal and business assets to be pledged as collateral. This means that you won’t have to put up expensive assets to secure an inventory financing loan. Most Amazon businesses would benefit from this type of financing as their sourcing methods differ from one business to another.
- Allows businesses to invest in other growth area
- Perhaps the most obvious advantage of inventory financing is that it unlocks the much-needed cash that’s usually tied up to inventory. Since you don’t have to reallocate funds from other aspects of your business, you now have extra working capital to reinvest in other growth areas as well as expand your product lines.
- Improves cash flow during slower seasons
- While it’s true that inventory financing products can help you prepare for peak shopping seasons, a lot of businesses also use inventory financing as a lifeline during slower sales periods. Seasonal businesses benefit from inventory financing as they are more prone to experience cash flow issues during slow shopping seasons. With inventory financing, seasonal businesses can have the funding they need to be able to meet recurring financial obligations.
What are the alternatives to inventory financing?
If you’re wondering how to grow your Amazon business through alternative inventory financing methods, then we’ve got you covered! Here are some of the alternatives to inventory financing that you should know about:
- Business Credit Cards – Like an inventory line of credit, business credit cards enable businesses to access a revolving line of funding with a set limit. You can use them to cover recurring expenses while also taking advantage of points and rewards. When looking for business credit cards, make sure to shop around and look for financial institutions that offer interest-free financing and reasonable interest rates.
- Merchant Cash Advances – A merchant cash advance provides businesses with an upfront lump sum in exchange for a slice of your business’s daily credit card sales. While it seems sensible for Amazon businesses to use merchant cash advances due to the platform’s use of credit card payments, it’s important to remember that merchant cash advances should be considered as a last resort due to its typically high interest rates.
- Crowdfunding – Crowdfunding is a relatively new method of raising capital through a network of individual investors. These individuals serve as financial backers that are willing to provide businesses with the necessary funds to expand, finance a new venture, or keep their shelves stocked.
Instead of taking out a traditional bank loan, businesses can hold a crowdfunding campaign by asking a large group of people to donate small amounts of money in order to meet a specific monetary goal. If the monetary goal hasn’t been met, businesses won’t receive any of the funds that were pledged to their project.
If you’re interested in funding your inventory purchases through an alternative financing option, check out Kickfurther.
What is Kickfurther and how can it help your business?
Kickfurther is an online inventory financing platform that allows companies to access funds that they are unable to acquire through traditional sources. This innovative funding platform enables a business’ biggest supporters and fans to purchase inventory on consignment. In return, individual backers receive cash when a company successfully sells their inventory. To learn more, visit kickfurther.com.
Key Takeaway
For companies experiencing rapid growth, access to additional funding is a must. However, it’s important to understand that inventory financing should go hand in hand with an Amazon inventory management strategy. Without proper planning and inventory management, you risk missing out on significant growth opportunities for your business.
