Inventory financing is when a business needs capital to acquire products for their business. Any business that carries inventory needs to have their shelves stocked consistently. We understand the sales cycle and vendor payments. Obtaining a loan or a business line of credit to purchase inventory can help you rotate more products and increase productivity. This is particularly true if you have an opportunity to buy that inventory at a discount.
How quickly your inventory turns is an important element in choosing a loan for your business. For example, if you expect your inventory to turn in one to three months, it will not make sense to obtain a long-term loan. A shorter-term loan will be more feasible. Why? You can gain access to capital every time you need inventory. A long-term loan will not make sense because next time you need to make an inventory purchase you will not have access to capital.
Inventory financing can be provided in numerous ways. A business line of credit is one solution. Unlike a business loan, a business line of credit allows the business owner to access part, or all of the credit line. Once you repay it back, you can utilize it again and again. This increases your purchasing power to acquire more inventory. This inventory financing method will allow you to use the funds when needed. There are costs associated with borrowing money. What is more expensive? Loosing an opportunity or buying inventory at a discount? You can achieve greater return on investment when you buy inventory at a discount. Also, you can increase your profit margins. Inventory financing makes financial sense. Don’t wait, access the funds you need to purchase your next inventory.
When you consider a small business loan for buying inventory, you need to take into consideration various factors such as: