Finance & Lending

 

07 19 2017

Inventory loans for small busineses

07 19 2017

What You Need To Know About Inventory Loans for Small Businesses

If you’re running a business which brings in most of its income through sales of physical products you know that keeping the shelves stocked is an important aspect of keeping your operation healthy.

That’s not always easy, though. Every business model has on- and off-seasons. A florist might see a large part of its revenue come in during the summer, while a toy company will probably see increased sales closer to the holidays.

What is an inventory loan?

When inventory is sparse, but orders are coming in, business owners need a solution. Many turn to inventory loans for help.

Inventory loans are short-term loans or lines of credit meant specifically for you to stock up on your most important products now, so you won’t have bottlenecks or delayed sales later.

Who gets inventory loans?

There are some businesses that are better served by inventory loans than others. These particular forms of financing, according to Fit Small Business, are usually best for:

  • Seasonal businesses, when they need to get ready for an influx of orders.
  • Retailers, when their cash is tied up in existing inventory, so they can’t expand their selection.
  • Wholesalers, when they need to accommodate large orders.

Do I qualify for an inventory loan?

Alternative lenders will want to know a little bit about your business to ensure issuing you a loan is a safe investment for them, and a good decision for you. If you’re ultimately not able to pay off the inventory loan because sales didn’t rise to your expectations, it’s a lose-lose for both of you.

To that end, Entrepreneur noted that creditors typically are most confident lending to businesses that have:

  • A proven track record.
  • A year or more in business.
  • A product that’s easy to sell.
  • A high inventory turnover rate.
  • Little to no outstanding debt.
  • High inventory level needs.

Not all lenders will require all of these aspects, but being able to claim several will certainly go a long way in securing an inventory loan. To find out what your business may qualify for, reach out to National Funding.

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