Working capital in retail business funds day-to-day operations. As money comes and goes, it’s important to properly plan and balance accounts to ensure cash flow is healthy. To maintain healthy cash flow, retail businesses often need to utilize funding for large expenses such as inventory. If cash is tied up in inventory, this can cause a dilemma for working capital. Especially when you factor delays in payment for inventory and the need to replenish it. If we back this up a few steps, there’s also the problem that you might just not have enough working capital to stock inventory.
So, how do you get working capital for retail inventory? Retail inventory financing is available (as you may already know), but you’ll want to carefully approach how you secure it. As a small business you may face strict requirements and high costs associated with inventory financing. In fact, we know this reality all too well as it’s the challenges of inventory financing for small businesses that began our mission.
At Kickfurther, we help small businesses obtain working capital for retail inventory – for up to 30% less than other options. Plus, it’s not a loan nor does it require the business owner(s) to give up equity, thus truly supporting the business you’ve worked so hard to build. We put you in control, as you’ve worked too hard not to be. If the idea of getting inventory now and paying later entices you, keep reading to learn more about how to get working capital for retail inventory.
What is working capital?
The difference between a business’s current assets and current liabilities. . . aka working capital. A very simple concept that holds a lot of weight. Working capital represents cash available to fund day-to-day operations, such as paying off short-term obligations and funding inventory purchases. Working capital is an essential measure of a company’s liquidity and financial health. Afterall, companies can have healthy sales but without working capital they are at risk. While working capital is more complex than the formula to do so, for reference, here’s how you calculate working capital:
- Current assets – Current liabilities = Net working capital.
In order to effectively calculate your businesses working capital, it’s important to know your monthly inflows and outflows of cash on hand. Maintaining an appropriate level of working capital is crucial for ensuring smooth operations, managing cash flow effectively, and meeting financial obligations in a timely manner. Without it, you may need to rely on external financing or take measures to increase your working capital, such as reducing inventory levels (an option you likely don’t want to deploy).
Why working capital is important for retail businesses
Retail businesses often need more working capital as they must have inventory to sell. It’s not that working capital is more or less important for retail business, it’s that retail businesses often face more of a challenge managing working capital. Working capital can directly impact a retailer’s ability to manage daily operations, meet customer demand, and generate revenue. Here are a few reasons how working capital can benefit retail businesses:
- Covering short term operational needs: Working capital provides the necessary funds to cover day-to-day operational expenses such as rent, utilities, marketing, maintenance, and other overhead costs. It ensures that a retail business can continue its operations smoothly without disruptions.
- Inventory management: Retail businesses rely on inventory to generate sales and revenue. Working capital allows retailers to purchase and maintain optimal levels of inventory. Plus, it ensures that there is enough stock available to meet customer demand while maintaining other areas of operations.
- Technological advancements: In the rapidly evolving retail industry, technological advancements play a crucial role in improving efficiency, customer experience, and competitive advantage. Working capital enables retail businesses to invest in technologies such as point-of-sale systems and e-commerce platforms. These investments can streamline operations, enhance customer engagement, and drive growth.
- Payroll costs: Employee wages and benefits constitute a significant portion of a retail business’s expenses. Working capital ensures that a retailer can meet its payroll obligations regularly and on time, thereby maintaining a motivated and productive workforce.
- Setting up new retail locations: If a retail business plans to expand by opening new stores or locations, working capital is vital. It provides the necessary funds to secure lease agreements, renovate or build new store spaces, purchase initial inventory, and cover other startup costs. Sufficient working capital supports the successful launch and initial operations of new retail locations.
- Equipment: Retail businesses often require various equipment, such as display shelves, cash registers, refrigeration units, computers, vehicles, and security systems. You’ll need cash available to purchase the equipment you need to run your business.
Options for working capital for retail inventory
A common choice for retail businesses is inventory financing as it can solve working capital issues and provide other benefits as well. Plus, there are usually more options for inventory financing since it’s secured by inventory. This means it can be easier for small businesses to qualify. As you explore options consider the costs and overall impact on the business, good and bad. Here are some options you can look into for working capital for retail inventory:
- Inventory financing
- Term loans
- Line of credit
- Small Business Administration (SBA) loans
- Invoice financing
- Merchant cash advances
How to Prepare for Working Capital Financing
As you prepare to obtain working capital financing, there are a few things you’ll want to address:
#1. Analyze your inventory: Before requesting a loan or funding for inventory you should have a pulse on current sales, demand, trends, and so forth.
#2. Determine how much working capital you need: You’ll need to determine how much working capital you need. If funding is for inventory this may be in terms of your next order. Oftentimes backers or lenders will pay suppliers directly so you’ll want to have your ducks in a row to make things as seamless as possible.
#3. Choose the option that’s best for you: As a business owner, you are responsible for big decisions on a regular basis. Working capital financing is no different. Be sure you compare options and find one that works for you. If working capital financing is going to put strain on your business, it may just not be the right option. Choosing an option like Kickfurther allows you to control repayment terms, maintain equity in your business, and keep debt low since it’s not a loan.
At Kickfurther you can get inventory now and pay later, all while having fun doing so. Our platform connects business owners to a community of backers that can fund up to 100% of inventory.
- No immediate repayments. You control repayment. Don’t pay until your product sells.
- Non-dilutive. Maintain equity in your business, we know how hard you worked for it. We are here to work with you, not against you.
- Not a debt. Because you have enough financial strain, this is not a loan.
- Upfront capital. Pay suppliers faster with upfront capital, there when you need it.
Tips for Successfully Securing Working Capital Financing
Securing working capital can be essential to a retail business’s success. However, especially for smaller businesses, it can be difficult to obtain the working capital financing needed to grow your business. In order to make sure you are ready to successfully secure the financing you need, here’s some tips.
- Make a plan (think long-term)
- Organize documents
- Keep a close eye on cash flow
- Keep your foot on the accelerator.
Our most valuable tip though. . . choose Kickfurther for working capital inventory funding!
Closing thoughts
Retail businesses owners have enough to worry about and working capital is often at the top of the list. By taking advantage of working capital financing, you can free up the cash flow you need to grow your business and ensure you meet your day-to-day obligations.
At Kickfurther, we understand the importance of having cash on hand and want to make sure your business is operating at the level it should be. Let us help you get affordable working capital, so you can get back to putting your cash where it matters most – growing your business!
Interested in getting funded at Kickfurther? Here are 3 easy steps to get started:
#1. Create a free business account
#2. Complete the online application
#3. Review a potential deal with one of our account reps & get funded in minutes
