Lendinero's blog on Growing Your Business
Obtaining financing for your small business can be challenging. Most small businesses feel that they can obtain financing with no roadblocks. This is not completely true. Obtaining a small business loan can be a challenge. Inventory financing for small businesses is a great option that may require less paper work.
A business line of credit is probably the best option for inventory financing. A business line of credit is the hardest program to qualify for. Why? Banks and lenders know that if you obtain a line of credit that you may not use it for several months. Lenders must have those funds ready for you if you change your mind. Lenders make money by collecting interest. If you have a line of credit and you don’t use it, lenders will not make a profit.
Aside, from business lines of credit there is short-term financing to purchase inventory. A short-term loan is actually a great financing option to obtain new inventory. Your sales cycle plays an important role when obtaining a short-term loan. If you purchase inventory and you sell it within the next 30 days, your sales cycle is 30 days. Why would you need a 12 month loan if you can sell the inventory within 30 days? Many business owners who request long terms for inventory may not know their sales cycle. Knowing your sales cycle is an important factor when obtaining a short-term loan.
If you have short-term sales cycle you can reutilize the funding from any loan to continue the process. This allows you to have continuity in moving products in and out of your business. There is cost for obtaining a loan and you need to factor that into your gross and net profit margins. If you can figure this out you can use the lender’s money as oppose to your own money to keep pushing inventory.
Inventory financing for small businesses is a great option for those businesses who have short-term sales cycles.
If you’d like to learn about inventory financing at Lendinero, click here.
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By Gil Zapata
Miami, FL October 4th, 2017
© 2015 Lendinero