One recurring theme in business is running into cash flow issues. While there are several ways to ensure that your business always has enough cash to cover your liabilities, unforeseeable circumstances such as equipment breakdown or slow-paying customers can play a role in how efficient you can manage your cash flow. Due to this, businesses would often turn to loans to fund recurring expenses without depleting their operational funds.

As a business owner, it pays to be familiar with multiple types of loans that you can apply for in case you become strapped for cash. And, when it comes to finding additional financing for additional inventory purchases, it’s no different. Fortunately, there are a couple of inventory financing loans out there that can help you restock during peak shopping seasons. But first, let’s talk about what inventory loans are and what it’s for.

What is an inventory loan?

An inventory loan is exactly as it sounds. It is a type of financing product that enables businesses to purchase inventory upfront for products that will be sold at a later date. The purchased inventory serves as collateral for the loan and can be seized by the lender in case the borrower defaults. Inventory financing loans are commonly used by businesses that have exhausted other possibilities for financing.

Who should consider inventory financing loans?

Although most product-based businesses can use inventory financing loans, this type of financing product is mostly used by retailers, wholesalers, distributors, manufacturers, and other businesses that experience a high inventory turnover rate. If you’re unsure about whether or not an inventory financing loan will meet your business’s needs, ask yourself the following questions:

• How much inventory do I need?
• Can I afford additional inventory purchases?
• Am I capable of repaying an inventory loan?
• Do I have an in-demand inventory?
• Do I have a reliable inventory management system?
• How long will the process take before I can access additional funding?

Answering these questions will help you determine if an inventory financing loan is right for you. However, it does not stop there. You would also have to familiarize yourself with the many different types of inventory loan options that you may be able to qualify for.

What are the different types of inventory loans?

While most businesses prefer term loans and lines of credit to fund their inventory purchases, there are times when other funding options provide a better alternative for your current financial needs. In this section, we will discuss the different types of inventory loans that businesses may want to consider depending on their circumstances.

Term loans

Term loans are granted as an upfront payment that business owners repay with interest over a certain period. As one of the most common forms of business loans, this type of inventory financing loan is perfect for businesses that have built a strong credit history and constantly experience strong demand. However, it is important to note that term loans may be difficult to qualify for.

• What we like:
  • Paid in predictable monthly installments
  • Competitive interest rates
  • High loan limits
• What we don’t like:
  • It may be difficult to qualify for
  • Requires excellent credit
  • The review and approval process can take weeks 

Line of credit

Since lines of credit are known for having a revolving credit line, it is a perfect option for businesses that need regular access to extra capital. Once approved, businesses will be able to access a specified amount of funding that borrowers can draw cash from as they see fit. Another great thing about lines of credit is that you only pay interest on the borrowed amount and not the total amount available.

• What we like:
  • Funds can be accessed as needed
  • Only pay interest on the amount borrowed
  • Can be used for most business expenses
• What we don’t like:
  • It may come with variable interest rates
  • The due diligence process can take weeks
  • Higher chances of overspending

Merchant Cash Advance

A merchant cash advance is a great financing alternative for businesses that have tried to secure more traditional types of financing. Merchant cash advances involve lenders providing cash advances to borrowers in exchange for an agreed-upon percentage of future sales. Usually, lenders analyze your sales performance to determine if you will be able to pay back a cash advance. Since this is a type of short-term financing solution, borrowers should expect higher than normal interest rates compared to other financing options.

• What we like:
  • Can be easier to acquire as opposed to other types of inventory loans
  • No need for upfront collateral
  • Can be a great option for businesses with bad credit
• What we don’t like:
  • May come with high interest rates
  • Should only be treated as a short-term funding solution
  • Easy to get trapped in a debt cycle

Business Credit Cards

Like lines of credit, business credit cards can be used to cover recurring expenses while earning points and rewards. When evaluating business credit cards, make sure to look for 0% introductory APR (annual percentage rate) promotions to make the most out of interest-free purchases.

• What we like:
  • Easy to qualify for
  • Funds can be accessed as needed
  • Borrowers can take advantage of rewards and incentives
• What we don’t like:
  • May come with high interest rates
  • May present some security challenges
  • Potential for misuse

SBA Loans

Probably the most popular out of the different types of SBA loans is the Standard 7(a) loan. What makes the Standard 7(a) loan a popular choice for businesses is its high loan amounts and flexible repayment terms – making it ideal for businesses that are trying to purchase additional inventory while experiencing cash flow issues. While SBA loans seem like an ideal solution to your business’s funding needs, it is important to note that it is one of the most difficult loans to acquire.

• What we like:
  • Comes with low interest rates
  • Flexible repayment terms
  • High loan limits
•     What we don’t like:
  • The review and approval process can take weeks
  • Most, if not all, SBA loans require a personal guarantee
  • Excellent credit is often required

Crowdfunding

As the name implies, crowdfunding is a method of raising capital by tapping into a “crowd” of people and asking them to donate small amounts of money.  Instead of taking out a traditional bank loan, businesses can use crowdfunding to expand their operations, introduce a new product, fund a new business venture, or restock their inventory. This type of financing enables businesses to tap into a wider investor pool and raise money quickly without giving up their equity.

• What we like:
  • Validates your business idea (if the campaign is successful)
  • You can keep all of your equity (depending on the type of crowdfunding strategy you choose)
  • You can tap into consumers that already believe in your brand/industry
• What we don’t like:
  • High possibility of not funding your intended amount
  • Risk of losing intellectual property
  • Only suitable for product-based businesses

For a crowdfunding effort to succeed, businesses must carefully plan their strategy to capture the attention of the general public. It also pays to familiarize yourself with a number of crowdfunding platforms that cater to what you currently need.

For those looking to fund business growth, Kickfurther can be a great way to acquire additional growth capital. With Kickfurther, businesses have an alternative funding option to raise the capital needed for additional inventory purchases. On Kickfurther, brands can fund inventory purchases and begin making payments on the new inventory only once it sells, eliminating the cashflow bottleneck that the immediate repayment schedule or daily debits from other funding solutions cause. 

Which inventory loan is best for your business?

Is there such a thing as a “best inventory loan for businesses?” Unfortunately, there is no one-size-fits-all answer to this question. It highly depends on the loans you will be able to qualify for and the lender you will be working with. While it seems tedious, arming yourself with enough know-how about the different financing options available to you is important to determine which type of inventory loan is perfect for your business’s needs.

How can you determine which type of loan is best for your inventory needs?

To better determine which type of loan is best for your inventory needs, you must study the following factors:

• Loan amount – How much funding do you need? When applying for a loan, make sure to have a clear repayment plan. Never take out an amount that you know you can’t pay back. Remember, the higher the loan amount, the more interest you’ll pay.
• Interest rates – Keeping the loan amount reasonable means you will also pay a reasonable amount in interest. When it comes to financial decisions, it’s only natural to prioritize how much interest you’ll pay as it would eat a big chunk out of your profits.
• Repayment flexibility – One of the most important things to consider when taking out a loan is the repayment terms. More often than not, flexible repayment periods mean lower monthly installments paid for a longer duration.
• Fees and charges – Like other forms of funding, some inventory loans come with additional fees and charges such as appraisal fees, origination fees, late fees, and prepayment penalties.

Keep in mind that the factors to consider depend on a case-by-case basis. This is by no means a comprehensive list of factors to take into account to be able to determine which type of loan is best for your inventory needs. The best course of action to take is to get in touch with your potential lender and ask about the specific loan you are trying to acquire.

Key Takeaways: How to Determine Which Type of Inventory Financing Loan Is Right for Your Business?

• Understand why you need a loan.
• Prepare for the diligence process, which can vary depending on the funding you are planning to apply for.
• Familiarize yourself with the variety of loans out there to better determine if a particular solution meets your needs better than another.
• Consider the loan amount, interest rates, repayment terms, and additional fees and charges before deciding on a loan.
• And lastly: be sure to shop around to compare the different inventory financing loans before settling on a loan.

Knowing how to prevent and avoid chargebacks can benefit your business and customers. If you are looking for ways to prevent, avoid, and reduce chargebacks, you are in the right place. The first step toward avoiding chargebacks is understanding them. Being proactive with chargebacks can save you money in the long run. There are three main types of chargebacks – merchant error, true fraud, and friendly fraud chargebacks. Of the three types of chargebacks, merchant errors are the most common. Merchants are bound to have chargebacks. However, merchants with chargebacks exceeding 1% – 1.5% of monthly transactions may need to investigate. Merchants that have a lot of chargebacks may have several errors going unnoticed causing chargebacks or the merchant may not be adequately preventing fraud. Keep reading to learn and gain valuable insight about what chargebacks are and how you can prevent them.

What is a chargeback?

A chargeback is simply a disputed transaction. In most cases, chargebacks are initiated by the cardholder’s bank and are designed to be a form of consumer protection. However, chargebacks are often overutilized. As a result, merchants and customers are often inconvenienced and frustrated by chargebacks. If a customer contacts a merchant and receives a refund, this is not a chargeback. In order for a refund to be considered a chargeback the consumer must ask the bank for their money back. Once the consumer initiates a chargeback the bank should investigate to determine if the request is valid. In most cases, merchants do not know about chargebacks until the money is reversed. Because chargebacks are designed to protect consumers, the process is in favor of the cardholder’s safety rather than the merchants livelihood. 

Why were chargebacks created?

In the early stages of credit cards, there was a lack of confidence. Most people were paranoid about using a credit card wondering whether it is safe or unsafe. What happens if my card is lost or stolen and used? Will I be responsible for the bill? These were valid concerns and still are. Concerns such as these are one reason why chargebacks came about. Another reason was complaints regarding “fraudulent” charges made my merchants with a customer’s credit card information. While some merchants may have actually made fraudulent charges, other merchants may have just been trying to collect money the believed was owed to them. To promote the use of credit cards while alleviating customer concerns, chargebacks were created. As a business owners and consumer, there are times when you are probably thankful for chargebacks and other times when you wish they did not exist.

What are the 3 main types of chargebacks?

As we mentioned earlier there are three main types of chargebacks; merchant error, true fraud, and friendly fraud chargebacks. So what’s the difference? Is there a way to prevent any of these? Let’s take a closer look at the three main types of chargebacks. . .

#1. Merchant error chargebacks

Merchant error chargebacks are usually unintentional errors such as system errors or clerical mistakes or just about anything that may leave your customer unsatisfied. For example, if a customer paid for five burritos but only received four, you may get a merchant chargeback. With delivery services on the rise many merchants are experiencing a rise in chargebacks as they are not dealing directly with customers face-to-face. Another example of a merchant error chargeback could be charging customers a subscription fee for a subscription the customer believes they cancelled. 

#2. Criminal fraud chargebacks 

Criminal fraud is less common than merchant error chargebacks. Criminal or true fraud chargebacks are when products or services are purchased using stolen credit card information. When the legal cardholder notices the fraudulent charges they will most likely report them to their credit card company, thus causing a chargeback. As a merchant it’s critical to verify customer identification with credit card purchases. However, this may be more challenging with online purchases. In some cases, criminal fraud charges may occur due to a misunderstanding. Let’s say your wife or husband or child uses your credit card but you were unaware, you may report that charge as fraud, thus causing a chargeback. It’s important to do everything possible to avoid criminal fraud chargebacks as they can cause negative claims against your business and be time consuming. 

#3. Friendly fraud chargebacks

Friendly fraud chargebacks may be unavoidable. Friendly fraud chargebacks occur when customers file a claim stating they were unaware of a purchase. Customers could also claim that they never received a product. Another consumer trick to get products without paying for them is to say they returned the product but did not get a refund. Merchants that have 100% online transactions will most likely encounter their fair share of friendly fraud chargebacks. 

How does a chargeback work?

Chargebacks occur when cardholders dispute charges. When a cardholder disputes a charge or charges, the funds are usually held from the business until the issue is resolved. If the bank approves the customer’s claim, the funds should be returned to the cardholder. If the bank denies the customer’s claim, the business should receive the funds back. In between the claim and resolution there can be a lot of paperwork and documentation required. 

Chargeback reason codes explained

If a bank issues a chargeback, they should provide a 2-4 digit alphanumeric coded known as a reason code. Reason codes can be used to identify the reason for a dispute. Certain brands may have their own system for reason codes. You should be familiar with the reason code systems for the credit card brands you accept. As a merchant when you receive a reason code you can either accept the dispute or fight back. Using the reason code, merchants can provide evidence proving the original transaction was valid. Reason codes are designed to eliminate guesswork and opinion-based decisions. Reasons codes such as “DP” meaning “Duplicate Processing” are easy to recognize, but others may not be.

Types of chargebacks to avoid

Ideally, merchants should avoid all types of chargebacks. However, this is probably not possible, no matter how hard you try. While all chargebacks can be time consuming and costly, criminal fraud chargebacks can be especially time consuming. Ensuring you have fraud prevention systems in place for online or instore purchases can help you avoid criminal fraud chargebacks. 

How merchants can avoid chargebacks and credit disputes

If you own a business you should evaluate the frequency that chargebacks are occurring. Furthermore, you should determine what type of chargebacks are occurring most often. Once you have analyzed your chargebacks, you can put preventative measures in place. Another way to avoid chargebacks is to provide superior customer service. It’s important your customers know how to reach your customer service team if there is an issue. If they feel that your company can resolve an issue they may be less likely to contact their credit card company. This could result in a fewer amount of chargebacks. Here are 3 ways merchants can avoid chargebacks. . .

#1. Enforce payment processing protocols

Ensuring that employees follow processing protocols for card-not-present transactions can help avoid chargebacks. If a processing network feels you are ignoring protocols they may rule unfavorably. 

#2. Maintain excellent records

In the event of a chargeback, you may be required to provide documentation to prove the transaction was legitimate. Keeping records and backups that are easy to retrieve can help you in the event you have to fight a chargeback. 

#3. Set realistic expectations for customers

Being realistic with customers can improve customer satisfaction and lessen your chance of a chargeback. If customers are unsatisfied with a product or service or feel it was improperly represented they may justify disputing the charge with their credit card company. 

Wondering how to start an eCommerce business? In this article, we will discuss the ins and outs of what a wholesale eCommerce business really is and how to set it up for success. Read on to find out more!

What is an eCommerce business?

What exactly is an eCommerce business? Also known as electronic commerce, eCommerce is the practice of buying and selling goods or services via the internet. Put simply, it is a way of doing business online without ever going to a brick-and-mortar. If you have ever shopped for anything online, then you have already participated in the eCommerce scene.

What is wholesale eCommerce?

Not to be confused with other types of eCommerce businesses, wholesale eCommerce is a kind of B2B (business-to-business) eCommerce model that refers to businesses selling their products to other businesses in bulk and at discounted prices. The most significant advantage of starting a wholesale eCommerce business is that it simplifies the buying experience by ensuring optimum accessibility while also offering the best prices.

In this day and age, more and more businesses are relying on the internet to simplify most of their processes. The rise of wholesale eCommerce has made it easier for businesses to find the best possible prices online without the need for tedious negotiation processes.

Factors to Consider Before Starting Your Wholesale Ecommerce Business

Starting a wholesale eCommerce business is like starting any other business. You would have to put in ample time and effort to make sure that your business will be profitable. After all, no one wants to go into business expecting to fail, right? Before starting your wholesale eCommerce business, check out some of the most important factors to consider:

What do you want to sell? 

Starting an eCommerce business begins with finding the right product to sell. And, contrary to popular belief, finding a set of products or a single item to sell is a remarkably tedious process. Choosing a competitive item usually involves in-depth market research to be able to determine if a product is profitable. Another key consideration when choosing a product to sell is the type of sourcing method to use. Make sure to choose an item that’s easy to source to lower instances of stockouts.

Which eCommerce platform will you use?

Familiarizing yourself with the most popular eCommerce platforms is usually one of the first steps when starting an eCommerce business. However, you also have the option to develop your own eCommerce website. It all boils down to what you, as a business, need. In general, your eCommerce platform should allow you to manage your content, optimize your online store to be compatible with multiple devices, accept payments, and enable you to gain valuable insight into your customer’s buying habits.

Is there demand for your product?

Before opening your wholesale eCommerce business, you should first determine if there is enough demand for your product. Demand forecasting determines how much a customer is willing to pay for your product and enables you to have an idea about the amount of inventory you should hold at any given time.

How and where will you source your products?

Are you planning to source your products domestically or overseas? Are there logistical constraints that you need to be aware of? Do you have a place to store your products? As a wholesale eCommerce business, it is important to note that you have to source your products early and upfront before you could cater to the needs of your customers. The truth is that the market can be volatile. Make sure to pay attention to various factors that may affect how you source your products and your eCommerce business as a whole.

Who are your competitors?

If you need a better understanding of the market, conduct a thorough analysis of your competitors. The purpose of competitor analysis is to acknowledge your competitor’s strengths and identify their weaknesses in comparison to your own. In doing so, you will be able to find gaps in the marketplace and pounce when an opportunity presents itself.

Is a wholesale business profitable?

Like other businesses, a wholesale business depends on several different factors to ensure success. As a business owner, you should be able to have a product that is in demand, identify opportunities in the market, negotiate for lower prices, and provide exceptional customer service. Another important thing to keep in mind is keeping your profit margins healthy. As a product-based business, a great pricing strategy is a must to ensure long-term profitability.

What are the benefits of being an eCommerce wholesaler?

If you’re seriously considering becoming an eCommerce wholesaler, it’s important to weigh its potential advantages. Check some of the most common benefits of being an eCommerce wholesaler below:

• Lower operating costs – Since wholesalers are able to buy products in bulk and at a much lower price point, they are likely to save a lot of money based on the reduced price per good. In addition, most eCommerce wholesalers also save on overhead costs since most of its key processes are conducted via the internet.
• Reach a wider audience – Businesses actively participating in the eCommerce space have the potential to reach a lot of people without the need for expensive advertising and marketing campaigns. Whether it be retailers interested in reselling your product or manufacturers that want to partner with you, eCommerce wholesalers can manage business relationships all online.
• Collect customer data – A key benefit of being an eCommerce wholesaler is the ability to collect important customer data. This would enable you to provide a personalized customer experience to improve your conversion rate.

Can I buy wholesale and sell online?

Yes! Most online eCommerce businesses use this sourcing method to save money on the cost of goods. By buying from wholesale suppliers, you are effectively lowering your sourcing costs and increasing your profit margin on resale.

Ecommerce for Wholesalers: Tips to Better Manage Your Wholesale Business

What makes an eCommerce wholesale business successful? Regardless of the type of business you have or the kind of products you sell, much of what it takes to run a successful wholesale business lies in your preparedness in certain aspects of your operation. Fortunately for you, we’ve compiled some tips to better manage your wholesale business. Check them out below!

Create a Business Plan for Your Wholesale Business

Whether you’re just starting out or exploring new ways to expand your wholesale eCommerce business, having a strong business plan will help guide you when making critical business decisions going forward.

Find a Reliable Supplier

Finding a reputable and reliable supplier for your wholesale eCommerce business is essential to your success. From sourcing raw materials to the production of goods, your supplier plays an important role in your business. Having a great relationship with your supplier means you can negotiate lower prices and better payment terms – therefore increasing your profit margins.

Focus on Providing the Best Customer Service

Are you building and nurturing a good relationship with your customers? Keeping your customers engaged and satisfied throughout their buying experience lets you collect valuable customer information that ultimately enables you to provide better customer service.

Measure Your Sales Performance

Do you have a system in place to accurately monitor your sales performance? Monitoring your sales performance, if done properly, helps you prepare for busy shopping seasons and ensure that you have enough stock on hand to meet customer demand. Measuring your sales performance also allows you to have an understanding of the aspects of your business that need improvement.

Ensure That You Have Enough Funding

For your wholesale eCommerce business to grow, you first need to raise enough capital to hit the ground running. Fortunately, there are a variety of options that you can choose from as a wholesaler. Some of the most common funding options you can consider are microloans, term loans, credit cards, and lines of credit. But if you’re looking for an innovative way to raise capital for your wholesale eCommerce business, you should check out Kickfurther.

Kickfurther is the world’s first online inventory financing platform that enables companies to access funds that they are unable to acquire through traditional sources. We connect brands to a community of eager buyers who help fund the inventory on consignment and give brands the flexibility to pay that back as they receive cash from their sales. This alleviates the cash-flow pinch that lenders can cause without customized repayment schedules allowing your brand to scale quickly without impeding your ability to maintain inventory. 

Wrapping Up: How Can You Plan for Wholesale eCommerce Success?

At the end of the day, the tips in this article are just that: tips. Ecommerce for wholesalers depends on a lot of different factors that would test how well-prepared you are and how quickly you can adapt to changes in the market.

What is inventory management?

Inventory management is the process of monitoring the flow of your inventory and determining how much stock to order at any given time. It streamlines order fulfillment by keeping track of your stock from the moment it arrives at your holding facility until it has been shipped to a customer. From organizing your inventory to meeting customer demand, inventory management plays a significant role in most, if not all, of your business operations.

Why is inventory management important?

Let us be upfront, there’s no one-size-fits-all strategy when it comes to inventory management. Your inventory management strategy should depend on your business model, sourcing method, and fulfillment system. If you fail to handle your stock successfully, it can lead to loss of profit and even business failure.

Having an effective inventory management system in place ensures that your business secures the right amount of stock in the right quantities. It also minimizes storage costs, improves cash flow, and guarantees customer satisfaction. While it may seem tedious, proper inventory management is a crucial process that affects almost every aspect of your business. Here are a couple of reasons why inventory management is important:

• Enhances inventory accuracy – Even the best inventory management system wouldn’t ensure 100% inventory accuracy. However, putting an effective inventory management strategy in place would help you meet demand by having the right products available whenever your customers need them.
• Avoids stockouts and excess stock – Maintaining optimum inventory levels, through inventory management, can easily be tracked by setting accurate reordering points for each of your products. Being unable to fulfill customer orders due to stockouts means you’ll most likely miss out on lucrative opportunities. It’s important to make sure that, when your stock levels are running low, your inventory management system would be able to immediately place a replenishment order to keep your inventory levels healthy.
• Improves cash flow – Whether it’s raw materials or finished goods, keeping an accurate stock record means you have a complete overview of how much cash you have tied up in your inventory. This lets you avoid ordering too much or too little of an item with cash that could be used on other business expenses.
• Boosts customer experience – It’s no secret that without repeat customers, a business would fail. With inventory tracking and stock control, you can keep your most popular products in stock during busy shopping seasons and keep your most loyal customers happy.
• Keeps inventory organized – Poor inventory management can lead to harmful implications that could hurt your business. One of the most important benefits of properly managing your inventory is that it simplifies supply chain management. This helps you optimize product reordering while also speeding up order fulfillment.

How can a business manage its inventory effectively?

Choosing the right inventory management system and techniques can help your business fully utilize your resources. Here are some tips on how to manage inventory effectively:

• Organize your data – Organizing your data ensures that there are no disconnects between fulfilled orders and available inventory. It lets you stay ahead of peak shopping seasons.
• Conduct regular audits – A very important reason to perform regular audits is to identify inventory issues. An audit can assist you in determining inventory issues before you end up with backorders. Regular audits are also an excellent way to make sure that your financial statements are accurate and up to date.
• Analyze reports – Analyzing multiple reports can be overwhelming. However, keeping track of your key performance indicators is an important task that you shouldn’t overlook. Most successful businesses monitor how well their operation is doing based on vital metrics. From analyzing your inventory turnover rate to setting a reordering point, analyzing your data will increase your sales, enhance customer satisfaction, and enable you to accurately predict customer demand.
• Maintain a good relationship with suppliers – As a business owner, your supplier will be your most important business partner. From sourcing raw materials to the production of goods, a reliable supplier consistently delivers quality products at the required time. The approach you take with your suppliers will impact the way they service your business so it’s only natural that you build and nurture a great professional relationship with them.

Top Inventory Management Techniques You Must Know

1. Inventory Forecasting – Inventory forecasting is a method used to predict the amount of inventory needed to satisfy future consumer demand. Businesses that conduct proper inventory forecasting can make informed decisions about how much inventory they need at a time. This allows businesses to accurately manage their finances while also optimizing their inventory.
2. Just-in-Time (JIT) Method – The JIT method is a type of inventory management system that improves efficiency and reduces waste associated with production. Under the JIT system of inventory management, products are produced only after an order is received. This helps companies cut costs by only purchasing materials as required rather than wasting large amounts of materials and products. However, one big downside to the JIT method is that it can leave you vulnerable to demand shock when you suddenly experience an increase in demand. This could lead to stockouts and the inability to meet demand.
3. Safety Stock – As the name implies, safety stock refers to the extra inventory held by a business to reduce the risk of stockouts. Having the right amount of safety stock allows businesses to keep extra products on hand in case there is an unexpected increase in demand or a supplier fails to deliver items on time.
4. Dropshipping – Dropshipping is an inventory management fulfillment method where businesses fulfill orders by passing the storing, packing, and shipping of products to a third-party supplier. This type of strategy enables businesses to save on overhead costs and move away from the traditional retail model. If you use this kind of inventory management model, expect to also save on recurring expenses such as utilities and storage fees.
5. Cross-docking – Cross-docking is an inventory management system that minimizes the time your products spend in your warehouse. After arriving in your storage facility, goods are sorted and immediately loaded onto another truck based on their end destination. As opposed to dropshipping, businesses that use the cross-docking method will gain oversight over the shelf life of a certain product.
6. ABC Analysis – ABC analysis is an inventory management strategy that categorizes inventory into three main categories:

• • “A” items represent a business’s most valuable products. This category often includes products that heavily contribute to a company’s bottom line.
  • Compared to “A” items, “B” items are made up of products that are of lesser value.
  • “C” items typically represent the largest category of products that contribute the least to a company’s overall profits.

ABC analysis is a great categorization technique based on each product’s value. This enables businesses to determine which of the products to prioritize over the less valuable ones. It also gives businesses an idea which inventory items pose the biggest risk and which ones are the most profitable.

1. Economic Order Quantity – Economic Order Quantity, or EOQ, is an inventory management system focused on maximizing a business’s profits. EOQ works based on a formula that identifies the ideal quantity of a particular item to ultimately minimize the total cost of production, holding, and other variables. However, as with all the inventory management techniques in this list, maintaining optimal inventory levels differ from one business to another. Make sure to evaluate the advantages and disadvantages of this inventory management model and determine if it fits your needs.
2. Consignment Inventory – Consignment inventory is an inventory management arrangement where a vendor or a wholesaler provides a business with goods without paying upfront. In this business arrangement, the consignor (vendor/wholesaler) maintains ownership of the products, and the consignee (usually retailers) is only required to pay for the goods until after they are sold. Consignment inventory is usually used by retailers to test the viability of new products without putting their cash flow at risk. If you’re seriously considering consignment as a viable strategy for your business, you should check out Kickfurther. We’re an inventory financing platform that empowers businesses to scale and market their products with the aid of supporters and fans.

How can Kickfurther help your business?

Kickfurther is the world’s first online inventory financing platform that enables companies to access funds that they are unable to acquire through traditional sources. We connect brands to a community of eager buyers who help fund the inventory on consignment and give brands the flexibility to pay that back as they receive cash from their sales. This alleviates the cash-flow pinch that lenders can cause without customized repayment schedules allowing your brand to scale quickly without impeding your ability to maintain inventory. 

Interested in inventory financing with Kickfurther? Apply today.

Nowadays, businesses can access a plethora of financing options without ever going to the bank. However, choosing the best financing option that best meets your needs can be an overwhelming task. When choosing a funding source, you have to take into account a plethora of different factors such as your time in business, the purpose of the loan, and your overall creditworthiness. Without adequate research, your business can get stuck with a loan that you cannot afford. The good news is that there are new financing options out there that cater to more specific business ventures.

One such alternative financing option is crowdfunding.

What is crowdfunding?

Crowdfunding is a relatively new financing option that allows businesses to raise capital through a series of small donations from multiple individuals. These individual backers, depending on the crowdfunding strategy that was used, are usually offered something in return for their monetary contribution. Sounds neat, right? Crowdfunding has effectively changed the fundraising landscape for businesses and has paved the way for various innovative ideas to get the funding it needs.

What are the different types of crowdfunding?

There are three main crowdfunding types based on what businesses are willing to offer in return to their investors. Let’s discuss equity-based, donation-based, and rewards-based crowdfunding.

Equity-Based Crowdfunding

When investors are offered shares or a stake in the company in exchange for an investment, that is equity-based crowdfunding. As opposed to other types of business financing options, equity-based crowdfunding does not have a debt component. Instead, investors are offered partial ownership of a company.

Donation-Based Crowdfunding

Donation-based crowdfunding is a type of crowdfunding that encourages a free flow of donations from multiple individuals. This type of crowdfunding is most often used by charities and social organizations to raise money for a charitable cause.

Rewards-Based Crowdfunding

As the name implies, rewards-based crowdfunding involves businesses soliciting a stream of financial donations from individuals in return for an incentive or a token of appreciation. For instance, a startup clothing brand may reward anyone that contributes a certain monetary amount with a limited edition piece of clothing.

Do you pay back crowdfunding?

It depends on the type of crowdfunding strategy you used. If you are raising money through donation-based crowdfunding, then the individuals that contributed to your cause are expecting nothing in return. This means that businesses are not obligated to repay monetary contributions or offer equity. On the other hand, if you opt to use rewards-based or equity-based crowdfunding, then you are expected to either offer a token, an incentive, or an ownership stake in your company. If you are seriously considering crowdfunding as your next business financing option, it’s important to weigh the different pros and cons of this type of funding.

Crowdfunding Advantages and Disadvantages

When it comes to inventory financing, crowdfunding can present several advantages and disadvantages. To help you make an informed decision, we have compiled the most common pros and cons of crowdfunding.

Advantages of Crowdfunding

• Little to no financial risk. Crowdfunding allows businesses to test the viability of a product, a project, or a business venture without spending a fortune on raw materials or making a huge investment.
• Fundraising and marketing in one go. One great thing about crowdfunding is that it lets you raise the necessary capital you need while also validating your business idea. With crowdfunding, you would be able to gauge whether or not your business idea will generate enough demand to be profitable.
• You can opt to not give up your equity. Depending on the type of crowdfunding used, businesses can offer perks or rewards instead of equity. This helps you keep full ownership of your company and in charge of all business decisions.
• Great way to test the market. What makes crowdfunding unique is that it enables businesses to test the market before making a huge investment. If your crowdfunding campaign succeeds, this means that there is ample demand for the product or service that you are offering. If it doesn’t, then maybe it’s time to go back to the drawing board and start over.

Disadvantages of Crowdfunding

• Takes a lot of time and effort. The truth is that crowdfunding is a lot of work. From writing persuasive content to developing convincing marketing campaigns, you have to make sure that your campaign is interesting enough and that it conveys what your business is trying to achieve.
• May come with a lot of fees. Keep in mind that most crowdfunding platforms take a percentage of the funds raised by successful crowdfunding campaigns. You’ll also likely encounter signup fees and third-party payment processor fees.
• Risk of losing intellectual property. One of the requirements of a crowdfunding campaign is for a business to disclose its business idea. Unless your idea is protected by the necessary measures, you are risking losing valuable information about your product and opening the door for copycats.
• There is always a possibility of failure. Crowdfunding is becoming increasingly congested with thousands, if not millions, of crowdfunding campaigns being hosted each day. If your campaign doesn’t stand out, chances are you wouldn’t be able to meet your funding goal. It is also important to note that if you don’t meet your campaign goal, even if you raised a significant amount of money, you would not receive anything.

Is crowdfunding a good option to consider for inventory funding needs?

Fortunately, crowdfunding is a constantly evolving financial product. It has developed offshoots that focus on specific causes such as women-led projects, minority-owned businesses, social and environmental causes, as well as a platform that solely hosts inventory crowdfunding initiatives. If you are considering crowdfunding as an option to fund your inventory needs, you should check out Kickfurther.

Kickfurther is an inventory financing platform that allows businesses to raise funds through consignment opportunities or co-ops. Brands go through a strict vetting process that involves a review of their sales performance, personal and business credit history, as well as an internet search for any negative or criminal news about the business. This ensures that businesses using Kickfurther are a great fit for the platform and its community. If you want more information, visit www.kickfurther.com.

What are the most common types of inventory financing?

Apart from crowdfunding, there are several ways that businesses can choose to finance their inventory. If you think crowdfunding does not suit your business’s needs, check out these other inventory financing options:

Short-Term Loans

As the name implies, short-term business loans are mostly associated with loans that have shorter repayment periods. These loans are often offered by traditional financial institutions like banks and credit unions. This type of loan can be used for a variety of purposes such as purchasing equipment, financing expansion projects, or developing a new product. The only downside to this type of loan is that it often has higher interest rates compared to other types of loans.

Lines of Credit

A business line of credit is more flexible compared to term loans as it can be accessed anytime as long as businesses pay their balance on time and do not go over the borrowing limit. This could be a great option for inventory financing as a revolving line of credit could help businesses buy additional inventory during peak shopping seasons.

Personal Savings

Depending on the circumstances, using money you’ve saved up could be a great way to cover cash flow shortages. The main advantage of using your personal savings is that you do not go into debt. However, it’s important to note that this should be a last resort as you risk losing your investment forever in case your business folds.

Credit Cards

Credit cards can be used to cover day-to-day expenses while also accumulating points and rewards. When choosing a credit card as an inventory financing option, make sure to look for financial institutions that offer interest-free financing that would let you pay for big purchases over time without paying for added interest.

Online Loans

Online loans are offered by, you guessed it, online lenders. Online lenders are not associated with traditional financial institutions and are often seen as an alternative to banks. Like other loans, the amount that a borrower can qualify for is based on their overall creditworthiness. However, that does not mean that bad credit can hinder you from getting approved for an online loan. Online lenders are known to be more flexible when it comes to a borrower’s qualifications and can be a great option for borrowers that have exhausted other efforts to secure other types of loans.

How to apply for an inventory financing loan?

Inventory financing loans allow you to leverage your inventory to be able to secure additional funding. However, not all businesses will be able to qualify for an inventory financing loan. For a business to enjoy the many benefits of inventory financing, it must first meet the following criteria:

• Must be operational for at least one year
• Must be a product-based business with a reliable inventory management system
• Must agree to a due diligence process
• Must provide relevant and accurate financial statements
• Must prove that the business is profitable
• Must provide credit history and scores

Key Takeaway: Which Financing Option Is Best For Your Business?

Choosing from the many different types of inventory financing loans can be overwhelming. If we could leave you with one piece of advice, it’s this: shop around! The truth is that not all inventory financing loans are created equal. As a responsible business owner, don’t forget to compare interest rates, maximum loan amounts, and repayment terms offered by various lenders to be able to determine which loan will give you the best deal possible.

About Kickfurther

Kickfurther is the world’s first online inventory financing platform that enables companies to access funds that they are unable to acquire through traditional sources. We connect brands to a community of eager buyers who help fund the inventory on consignment and give brands the flexibility to pay that back as they receive cash from their sales. This alleviates the cash-flow pinch that lenders can cause without customized repayment schedules, allowing your brand to scale quickly without impeding your ability to maintain inventory or financial flexibility.