SMEs which run a product-oriented business often struggle with inventory management issues, especially during the peak season or when the cash flow is not enough to fulfill the orders. During such times, inventory loans are the best solution.
What are inventory loans?
Also known as inventory financing, these are small business loans that businesses can avail against their existing and/or future inventory to buy inventory. This line of credit can also be borrowed through an additional lien on other business property. Inventory loans are available to meet short-term inventory management requirements. They enable the businesses to easily fulfill incoming orders and replenish outgoing inventory without the risk of losing clients.
Who should take inventory loans?
Usually, the businesses which have seasonal sales, high inventory turnover rate or mature products with a good sales history should consider taking inventory loans. If the product is new or has a poor sales history, or the business is already in debt, it is advisable against taking it.
How can inventory loans help?
Inventory loans can scale your business in various ways:
- Boost seasonal sales
Businesses such as those dealing in back-to-school stationery, festive decoration or winter wear are dependent on seasonal sales. Since the sales are sluggish in the off-season, they are cash-strapped to adequately manufacture/store inventory for the peak times. At the same time, when the sales take off, they have to step up their inventory fulfillment efforts. Small business loans in the form of inventory loans can give businesses liquid cash as per their sales cycle.
- Keep storefront shelves stocked
Imagine a customer walking into a grocery store to buy a box of cereals, only to realize that it is no longer in stock! The customer not only returns empty-handed but also takes back a poor impression about the store. If this happens more than once, he is not likely to visit the store again. In order to prevent situations of sold-out or under-stocking, businesses can borrow inventory loans and keep their shelves stocked with adequate inventory all the time.
- Make payment to suppliers
The SMEs in manufacturing business often have to pay their suppliers of raw materials in advance, even before the manufacturing or actual sales begin. If they fail to pay the suppliers on time, the manufacturing could come to a halt, resulting in business loss and customer dissatisfaction. Inventory loans provide immediate funding to meet such type of short-term financial crunch.
What are the credit sources for inventory loans?
Inventory loans can be borrowed from banks or private loan vendors. However, the cost of taking loans from these sources is very high, the process is very tedious and collateral is mandatory. A better option is digital lending platforms such as FlexiLoans which provide inventory business loans without collateral. They are fast, flexible and paperless. The transactions are transparent and there are no hidden charges, so as to ensure the safety. They can help you with loans without collateral and as customized to your needs.
Inventory loans are good for the health of your business!
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