Inventory management is a bit of a Catch-22 for wholesale businesses. The first step to generating cash flow and building working capital as a wholesale business is purchasing inventory so that you have inventory to sell. But that can be hard to do if you do not already have working capital or the cash flow necessary for purchasing inventory. An inventory loan can help bridge the financial gap and let you sustainably grow your company as a small business owner.

But inventory financing can do so much more than helping you get your business off the ground. It can also help you make sure you have inventory to sell for high-revenue periods to maximize your revenue and also give you the working capital to take advantage of special pricing from suppliers by purchasing inventory in bulk.

The Advantages of Inventory Financing

Every type of business relies on working capital to operate, but wholesale and retail small business owners need it more than most. Working capital gives them the inventory to sell to generate cash flow and build more working capital. Small business loans help kickstart the process to get your business going or turbocharge it to spark renewed growth. But not every type of business financing works for every business and situation.

Take a business line of credit as an example. A business line of credit can give you a solid safety net to fall back on but does not meet immediate needs as well as a short term loan. And it may not be an option for many small business owners depending on their personal credit scores and existing credit lines.

But inventory financing is a type of business financing where the inventory itself is collateral for the loan used to purchase it. Which makes it a safe and flexible option for wholesale small business owners who need help purchasing inventory. If you sell the inventory you will be able to pay back the loan and take in a hefty profit. And if not, you only lose the unsold inventory.

And because it is a secured loan, inventory financing is easier to get than a business line of credit and even other types of short term loans. You may be able to qualify for an inventory loan from online lenders when traditional finance companies will not give small business loans to owners with the same personal credit scores or empty bank accounts. You just need to have been in business for at least a year and meet some other minimal requirements. Best of all, asset-based loans like inventory financing generally have a much lower interest rate than unsecured loans.

What This Type of Business Financing Can Do For A Small Business Owner

One of the best ways to maximize profits is to buy in bulk. This principle is the reason why retail businesses turn to wholesalers to provide their inventory, but it can also help wholesalers generate greater cash flow by negotiating better rates from manufacturers.

An inventory loan will give you the working capital you need for purchasing inventory at greater volume and lower rates. Given the razor-thin margins many wholesale small business owners operate under, these bulk discounts can make a big difference and help you grow your business. You can also beat out your competitors bypassing some of the savings on to your customers instead of taking them all as profit. By helping retailers maximize their profits, you will win customer loyalty, expand your customer base, and fill your bank account.

Inventory financing is also particularly useful ahead of high-revenue periods such as summertime or the holiday season. Retailers need to stock up before these seasons to maximize their profits, so you need to acquire inventory to sell to them even sooner. An inventory loan will help you take full advantage of these opportunities without eating into your profits with a high-interest rate.