Looking for an innovative solution that allows you to use inventory as collateral? Kickfurther innovates a unique approach that allows small businesses to give individuals the chance to buy inventory on consignment. We’re a low cost and flexible solution that has helped businesses grow and survive during the toughest economic times. However, there are other options that allow businesses to use inventory as collateral.

If you have been researching inventory loans you have probably heard about unsecured and secured inventory loans. Businesses that may be considered high risk to lenders may need to use a secured inventory loan or an alternative such as Kickfurther. If your credit history is questionable or you have short or inconsistent revenues or are a new business you may be struggling to find an inventory loan. You may be starting to think you just don’t qualify for an inventory loan but we are here to reassure you that you do qualify for an inventory loan. Before applying for an inventory loan you should evaluate your business plan to make sure you need one. We don’t say this to detour you but rather to encourage business owners to think through decisions extensively.

For example, let’s say you sell trendy jeans. You are a new company that has recruited influencers to advertise your brand. Word of mouth sales are picking up and next thing you know, a celebrity is recommending your line of jeans. Your company is starting to grow and it’s your job to keep up with the increase in demand. Part of keeping up with demand is making sure you have enough inventory. You may need to place an order much larger than the previous order but you don’t have the funds to do so. An inventory loan can provide the funds you need to purchase the amount of inventory you feel necessary. This is just one example of a company that could benefit from using an inventory loan.Below we will help business owners understand how to secure an inventory loans by using inventory as collateral.

What are the types of collateral for inventory funding?

When you use a secured loan with collateral the lender or bank can take ownership of the collateral if you default on the loan. When we say default, we mean miss multiple payments. Most banks won’t just take ownership of collateral with one missed payment. However, if you miss several payments or confess you are unable to repay the loan they can take ownership of the collateral. If you plan to borrow money to buy inventory, you can use the inventory you plan to buy as the collateral. Just about any kind of inventory can be used as collateral including. . .

• Apparel
• Vehicles
• Furniture
• Appliances
• Electronics
• Computers
• Office Supplies
• Cattle
• Shoes
• Jewelry

Assessing your Inventory Value

When you use a secured loan or inventory loan, the lender or bank will assess the value of your collateral and or assets. The business will get a portion of the assessed value. This is known as loan-to-value (LTV) ratio. For example, if you finance a vehicle you usually use the vehicle as collateral. If the blue book value of the vehicle is $10,000 and you can finance 110% LTV you can borrow $11,000 to purchase the vehicle. If the blue book value is $10,000 and you can finance 80% LTV, you can borrow $8,000 to purchase the vehicle. Inventory loan LTV’s work the same way, but typically lenders do not allow you to borrow 100% or more than 100% LTV. Most lenders allow businesses to borrow about 50% to 80% of the determined value of the collateral. If the bank needs to sell the inventory you provided as collateral, they need to make sure they get their money back. Therefore, the bank assumes they won’t be able to sell the inventory at market value. Most lenders base loans on liquidation or wholesale values rather than retail.

Benefits of Inventory Financing

Inventory financing can be a less expensive way for businesses to receive funding. There are many benefits of inventory financing for businesses. Ensuring you have plenty of inventory can help grow your business, increase revenue, and expand customer selection. In addition, inventory financing can help companies make sure they never miss out on a sale. If you are preparing for seasonal sales you may need to stock up on inventory before the holidays or your busy season. Busy seasons can vary depending on the type of business you own. If you need to stock up on inventory but don’t have the cash available you can use an inventory loan. Inventory loans can also help improve cash flow for companies. Business owners with credit challenges may benefit from inventory financing. Since you are providing collateral and the lender knows they will get their money back whether you pay or not, your credit history should have less impact on approval decisions. For growing businesses or business owners with credit challenges, secured loans or inventory loans can help establish credit. This can open up more opportunities and more financing options in the future.

While inventory financing has a long list of benefits for most businesses, it’s not a perfect solution for everyone. Business owners should evaluate the benefits and drawbacks as it relates to their company. If your company is struggling to sell products now, using an inventory loan may just create more stress and problems. However, if your company is selling products but needs more inventory to grow sales, using an inventory loan may help you achieve your growth goals. Business owners should take into consideration that regardless of how you borrow money, it costs more than paying cash. If profit margins are tight, inventory financing may cause you to operate at a loss or lower profit margin which could lead to future problems. You should take extra costs into consideration and factor them into your business plan. In some cases, inventory loans may have additional fees as well. Kickfurther offers extremely low fees and is up to 30% cheaper than other options.

Requirements for obtaining a loan with collateral

Requirements for obtaining a loan with collateral can vary depending on the type of loan and the lender. Requirements can also vary depending on how much you need to borrow. Some lenders may offer a secured line of credit while others may offer an inventory loan. They are both similar but a line of credit is more like a credit card. A line of credit provides companies with a revolving line of credit that allows them to access a certain amount of capital. Kickfurther has some basic requirements and a vetting process designed to qualify candidates to help ensure they will be successful. If you do not have proven sales or at least 6 months in business, Kickfurther may not be the best option for you. Some of the general requirements for obtaining an inventory loan with Kickfurther include. . .

• Must sell physical products
• Operates in the US
• Business revenue of $150,000+
• Proven sales
• Legal business entity
• Decent credit score and history (co-applicants welcome)

How does Kickfurther help businesses secure financing using inventory as collateral?

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.

Key Takeaway

In conclusion, inventory loans secured by collateral can benefit businesses and customers. While traditional banks and credit unions may offer inventory loans, there may be alternative options available that are more cost effective. Finding an affordable inventory loan can be a smart financing option that is usually cheaper than using a credit card. In addition, paying off a secured loan can help establish business credit, thus allowing you to qualify for an unsecured loan in the future.

Create a business account today at kickfurther.com. 

Inventory financing is an essential part of most successful business plans. Maintaining a plentiful supply of inventory can increase sales and revenue, while expanding customer selection. Small businesses that are struggling to find a low cost solution for inventory financing should pay close attention. Keep reading to learn everything you need to know about small business inventory and small business funding.

What is small business inventory funding?

Small business inventory financing provides funds to purchase inventory to sell. However, small business inventory funding can also be peer-to-peer lending, crowdfund, or another unique approach like Kickfurther. Whether you are a retailer or wholesaler you can use a small business inventory loan as long as you are a legal business entity. Ideally, most companies strive to find the lowest cost solution for inventory financing. As a small business you may be struggling with this. Lenders often view small business loans as higher risk causing them to offer unfavorable terms for business owners. Small businesses looking for a low cost inventory financing solution should visit Kickfurther.

What are the different types of funding options available to small businesses?

Small business owners should explore and research the various funding options available to make an educated business decision. There are a variety of factors that should be considered when selecting the best financing option. Business owners should consider how much they need to borrow, how long they need to borrow money, how much they can repay monthly, etc. Deciding important factors like these can help you narrow down options. The next thing that can help you narrow down options is to see which options you actually qualify for based on basic lending requirements. Let’s take a look at some of the best funding options for small businesses. . .

#1. Small Business Loan (SBA)

The SBA is an independent agency of the federal government that was created in 1953. Their purpose is to aid, protect, counsel, and assist the interest of small business concerns. The SBA also strives to help strengthen our overall economy by helping small businesses. If you can qualify for an SBA loan it can be a good funding option. However, SBA loans may be difficult to qualify for with a lengthy and time consuming application process. Before applying for an SBA loan you should make sure you can meet the minimum qualifications. For more information on program eligibility you can visit the SBA’s website. If you qualify for an SBA loan you’ll need to apply using an SBA approved lender.  In the event a small business defaults on an SBA loan, the government guarantees the commercial lender will be repaid up to 85% of any loss. This reduces the risk to the lender and allows small businesses to take advantage of lower rates and competitive terms.

#2. Business Line of Credit

A business line of credit is a revolving line of credit that provides business owners access to capital. Most lenders require businesses to have at least 6 months in business and $25,000 in annual revenue to qualify for a business line of credit. In addition, you’ll most likely need to provide collateral and a good credit score for approval. Business owners can use a line of credit to cover pretty much any business related expenses. In addition, you should only be charged interest on the amount you use. A business line of credit is usually used for short-term funding making it a good option for inventory financing. If you use an unsecured line of credit it may have a variable interest rate and approval amount up to $100,000. In most cases, interest rates are lower for a business line of credit than a business credit card. Different lenders can have different qualifications for approval.

#3. 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.

The Benefits and Drawbacks of Small Business Inventory Funding

Part of making sound business decisions is considering benefits and drawbacks. It may be tempting to jump into applying for a small business inventory loan but we encourage business owners to slow down and enjoy the process. Clearly thinking through decisions can help produce positive results.  In most cases, small business inventory loans are a good thing that can help a business grow. However, for some businesses small business inventory loans may not fix your problems and may just cause more debt. Let’s take a look at some of the benefits and drawbacks of small business inventory funding. . .

Benefits:

• Increase revenue
• Attract more customers
• Improve customer retention
• Expand customer selection
• Smoother daily operations
• Avoid running out of inventory
• Deliver better customer service
• Competitive advantage

Drawbacks:

• Taking on debt
• Increased inventory costs
• Risk of damaging credit
• Relatively short term loans
• Some inventory loans can’t be used for other financing needs

Most Common Ways a Small Business Can Secure Inventory Funding

Earlier we discussed some of the most common ways small businesses secure inventory funding. To recap, most small businesses use an SBA loan, business line of credit, or Kickfurther. Regardless of which funding option you select, you should make sure you are well prepared before applying. Most lenders will want to see a solid business plan, consistent or increasing sales, profit and loss statements, and more. In most cases, you can access things a lender may request prior to submitting an application. If you can’t locate the information online you should call the lender. Having your documents prepared ahead of time can result in a smoother funding process for the business owner and lender.

Is inventory funding right for your small business?

Most likely, yes. Inventory funding can provide the funds your business needs to increase revenue and grow. However, if you are struggling with sales or fear being unable to repay loans or investors inventory financing may not help. Before taking an inventory loan it’s important to properly assess your business to identify problems and appropriate solutions.

Why Kickfurther?

30% lower costs:

When you compare our rates to other forms of funding, you’ll often see you’re saving. Companies returning to fund additional deals often see their rates fall each time.

Higher funding opportunities:

We have an average funding of $78,000 but can fund up to $1MM to manufacture new inventory or get reimbursed for current stock and reinvest in where your business needs it most.

Funded in Minutes:

Once approved, our community of backers fund most deals within a day, often within minutes to hours.

Custom Payment Terms:

You don’t pay back until you start making sales. This alleviates the cash-flow pinch lenders cause without customized repayment schedules.

Key Takeaway

Alternative options like us are designed to help small businesses achieve success. Small businesses deserve an affordable inventory financing solution. We can provide small businesses with the inventory financing they need with flexible terms.

Effective inventory management can affect multiple aspects of your business. They can include storage or warehouse costs, fulfilling orders on time, meeting customer demand, faster shipping times, and more.  Making an inventory management mistake could affect your business for several months or maybe even years. In many cases, it takes a while for inventory management mistakes to be identified. The faster you can catch or all together avoid inventory mistakes, the better. Below we have created a guide on the top 10 mistakes to avoid when ordering inventory. Read them carefully and keep them in mind when ordering and managing inventory for your business.

Top 10 Mistakes To Avoid When Ordering Inventory

#1.  Manage inventory manually

Whether your business is just getting started or is well-established, you should use an ERP (Enterprise Resource Management) or automatic calculation in Excel. ERP systems gather and organize business data using integrated software. ERP systems may be more expensive to establish so you may need to start with an automatic calculation in Excel. In fact, this should be one of the first things you do. Companies often fear that they will miss something if they do not control inventory manually or they lack trust in an automated system. This is where the mistake begins. Different personality types can result in different ordering behavior. For example, a conservative individual may not order enough inventory. Manual orders are usually based more on intuition and emotions rather than an actual analysis.

#2. Complicated storage arrangements

Storage should be considered when ordering inventory. You’ll want to order an appropriate amount of inventory for the space and demand. So what do you do when you need more storage space? Rather than getting multiple storage locations, you should invest in one or a few warehouses, depending on the size of your company. The more storage locations you have for the same product, the more complicated inventory management becomes. This can lead to mistakes when ordering new inventory. If the same product is in one place you can have a display of the total stock. Having too much space in your warehouse can also lead to mistakes. Too much space can result in less careful inventory placement. Some of the most successful companies are known for having no extra space in their stock rooms.

#3. Too many products

Similar to having too many product variations, having too many products can also cause mistakes. If you are in charge of ordering inventory you should analyze sales to keep a pulse on what sells the best. Some may believe that more products result in more sales. While this may be true, more products also means more work and more investment. Buyers should focus on the core products that consistently sell the best. Some trendy products may spike in sales. When this happens you’ll want to keep up with demand but avoid over ordering. Trends and markets can change quickly. Therefore, sales and inventory should be analyzed on a regular basis.

#4. Limit product variations

If you are purchasing inventory, you should limit product variations. Having similar products with different SKUs can create confusion and cause mistakes. Typically the mistakes happen during inventory counting. It can also confuse customers. If customers see products that look the same and function practically the same, they usually think they are the same thing. To avoid this problem you should order from fewer vendors. Taking more time while doing inventory to check SKUs can also help avoid mistakes.

#5. Work far from inventory storage facility or warehouses

This mistake is similar to #2 in the sense that they are both focused on efficiency. If you are ordering inventory, you may want to do a physical check. If you have to drive far to do a physical inventory check, this can be a problem. In addition, if you are not close to your inventory, you may miss mistakes that are occurring. While Excel spreadsheets and ERP systems are important, they do not replace the visual aspect. Some of the most successful companies in the world work right beside their inventory. Some even work in the middle of their stock. Visually seeing your inventory can connect you to reality and help you manage stock while improving inventory ordering.

#6. Cutting costs with slower processing times

Some companies may try to multitask employees and cut costs. They may consider shipping less frequently or ordering inventory less frequently to reduce costs. However, this is usually a mistake. Having a consistent ordering schedule and individuals dedicated to managing it, is important. In addition, getting customers products as fast as possible creates brand loyalty.

#7. Not taking inventory on a regular basis

Not taking inventory frequently enough or on a regular basis is a big mistake. Having a proper inventory count is critical in order to order the right products and amounts. Most companies have to take inventory after hours which can be a challenge. In addition, some companies are open 24-hours. You should find an inventory system that works for your company. Some companies take mini inventory counts each day, week, or month. Mini inventory counts take less time but can still provide the information you need. However, you should still take full inventory on a regular basis in addition to more frequent mini inventories.

#8. Hiring unqualified applicants

Companies are always looking for ways to lower costs. While you may be able to find a cheaper person to do the job, this may not be the best decision. Especially when it comes to inventory. If you don’t have the right inventory or the right amount of inventory your sales will be affected. To avoid mistakes when ordering inventory you should make sure you hire a qualified individual. Hiring a less experienced person may be cheaper but it will likely cost you more in the long run.

#9. Failure to identify demand trends

Failure to identify demand trends can cause mistakes when ordering inventory. Businesses can cut inventory waste by properly identifying demand trends. If you fail to identify demand trends you can end up with unsold stock occupying space and funds that could have been used for inventory that would sell quickly. Companies should try to identify demand trends before competitors. This allows them to be prepared and order in demand products in the appropriate quantities.

#10. Improper management

Structure and management are critical when it comes to inventory management, hence to the name. Companies should have a structured process in place for taking and ordering inventory. In addition, only one or two people should be in charge of inventory. Having too many individuals in charge can lead to mistakes.

How Kickfurther Helps Small Business For Their Inventory Needs

Kickfurther can help FBA sellers secure inventory funding. We are the world’s first online inventory financing platform that enables companies to access funds they usually cannot 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.

Key Takeaway

In conclusion, effective inventory management is critical for a business to thrive. If you can avoid making mistakes when ordering inventory, you can save the business money. In some cases, mistakes are unavoidable. Humans cannot be perfect in every way. If you do make a mistake, be sure to recognize it and use it as a learning experience. If you need inventory financing you should apply through Kickfurther. Kickfurther was originally launched in 2014 by Sean De Clerq who, just like you, was looking for an efficient inventory financing solution. He launched Kickfurther with the intention of helping other entrepreneurs and business owners find affordable inventory financing.

One of the most difficult things to manage when running a small business is inventory. Whether you’re a startup or an established company, keeping tabs on your inventory requires a substantial amount of time and effort. Without putting in the work, inventory issues can contribute to losses, missed sales opportunities, and even bankruptcy. But with research and a bit of financial literacy, you can ensure that your supply chain is well-oiled and properly handled. After all, efficient inventory management does not magically happen overnight.

Is inventory financing right for your business?

Inventory financing is a type of asset-based lending that enables businesses to leverage their inventory to be able to obtain a business loan. Usually, businesses that experience poor cash flow apply for inventory financing loans to cover their inventory needs. Keep in mind that poor cash flow can stem from a plethora of different issues such as unsold stock, late payments, and – at times – unmanageable growth.

If you ever find yourself unable to restock your inventory, then it might be time to consider applying for an inventory financing loan. But how does it work exactly?

How does inventory financing work?

When it comes to inventory financing, businesses can either apply for a short-term loan or a line of credit. Just like any other business loan, your bank or lender will determine the terms of your loan depending on your business’ overall creditworthiness and the value of your goods. However, note that you will not get the full appraised value of your inventory in the form of a loan. Your lender will only finance up to 50% to 80% of your inventory’s appraised value.

For instance, if the appraised value of your asset is worth $100,000, chances are you would be eligible to borrow a loan amount of at least $50,000.

Types of inventory financing

There are two main types of inventory financing: an inventory loan and an inventory line of credit.

Inventory loans

An inventory loan comes in the form of an upfront lump sum payout that businesses can use to purchase additional inventory. This type of inventory lending solution has a fixed interest rate that the borrower must repay over a set repayment period. Inventory loans typically have a repayment term that ranges from a few months to a couple of years. Since inventory loans are considered short-term business loans, borrowers should expect larger monthly payments.

Inventory lines of credit

Another inventory financing loan that borrowers can look into is an inventory line of credit. Unlike an inventory term loan, an inventory line of credit lets businesses borrow up to their line’s limit and borrow more as they repay. This type of funding solution is perfect for businesses that experience seasonal demand as interest is only charged on the total amount borrowed. What’s more, borrowers can access the funds again as needed without having to go through the process of applying for another loan.

Inventory Financing Benefits and Drawbacks

As with any business decision, it’s important to do your due diligence. If you are seriously considering applying for an inventory financing loan, then it’s important to consider its many benefits and drawbacks.

Benefits of inventory financing

• Leverage your inventory instead of other assets. An inventory financing loan may be easier to qualify for as opposed to other types of business inventory loans since lenders ask borrowers to pledge their inventory as collateral.
• Get ahead of peak shopping seasons. While an inventory loan can help businesses stock up during peak shopping seasons, it can also help businesses that are trying to expand their product lines.
• Easily accessible funds for inventory purchases. If you were able to qualify for an inventory line of credit, then you would have accessible funds dedicated to your inventory needs. Just make sure to keep a close eye on your spending and don’t go over the credit limit!
• Works well with businesses of any size. No matter how big or small, businesses will encounter cash flow issues one way or another. Inventory financing is a great way to cover your inventory purchases without worrying about your other outgoing cash flow obligations.

Drawbacks of inventory financing

• May prove costly. Aside from the time-consuming and expensive due diligence process, businesses need to take into account the fees that come with an inventory financing loan. Some of these fees include origination fees, late fees, and prepayment penalties.
• Can only be used for inventory purposes. One big limitation of an inventory financing loan is that it can only be used to purchase inventory.
• May have high loan minimums. Because of its high setup costs, some lenders may require businesses to borrow a certain amount before their application could proceed. While loan minimums vary from one lender to another, some lenders may require a minimum of up to $500,000.
• Higher interest rates, shorter payment terms. Compared to other types of inventory lending, inventory financing loans are usually repaid over a shorter period which means businesses may have to cough up sizable monthly payments.

Are there alternatives to applying for an inventory loan or an inventory line of credit?

If you’re uncertain about applying for an inventory loan or an inventory line of credit from traditional financial institutions, the good news is that there are other alternative financing options you can consider. Check out some of them below!

• Credit cards – The great thing about having a business credit card is that you can use them to cover day-to-day business expenses while also earning points and rewards. Like lines of credit, business credit cards enable businesses to access a revolving line with a set limit. Most financial institutions also offer interest-free financing which is perfect for businesses that want to pay for big purchases over time without the hassle of paying added interest.
• Online loans – Due to its fast application process, online loans are becoming a popular choice for businesses that need a quick injection of cash. Online lenders usually allow borrowers to go through a pre-qualification process that would determine the different rates and terms they qualify for depending on their overall creditworthiness.
• Crowdfunding – Crowdfunding is a method of raising capital through an online network of individuals willing to provide the necessary funds for a business to expand, finance a new venture, or restock its inventory. Instead of taking out a traditional bank loan, businesses can use crowdfunding by asking a large group of people for small amounts of cash in order to meet a certain monetary goal. However, for a crowdfunding effort to succeed, businesses must carefully plan their strategy to capture the attention of their potential backers. One platform that specializes in an element of  inventory crowdfunding is Kickfurther.

How can Kickfurther help your business?

Kickfurther funds up to 100% of your inventory costs on flexible payment terms that you customize and control. With Kickfurther, you can fund your entire order(s) each time you need more inventory and put your existing capital to work growing your business without adding debt or giving up equity.

Why Kickfurther?

No immediate repayments: You don’t pay back until your new inventory order begins selling. You set your repayment schedule based on what works best for your cash flow.

Non-dilutive: Kickfurther doesn’t take equity in exchange for funding.

Not a debt: Kickfurther is not a loan, so it does not put debt on your books. Debt financing options can sometimes further constrain your working capital and access to capital, or even lower your business’s valuation if you are looking at venture capital or a sale.

Quick access: You need capital when your supplier payments are due. Kickfurther can fund your entire order(s) each time you need more inventory.

Kickfurther puts you in control of your business while delivering the costliest asset for most CPG brands. And by funding your largest expense (inventory), you can free up existing capital to grow your business wherever you need it – product development, advertising, adding headcount, etc.

Interested in inventory financing with Kickfurther? Create a business account today.