Guide to Multichannel Retail

Posted on by Kaylyn Perry

Most merchants begin selling on a single sales channel. They may start out with an Amazon store, their own ecommerce site, or even a brick and mortar storefront. Eventually, that single channel will begin to show limitations. There are only so many ways to drive traffic to a single point of entry. When a business reaches a point that it’s time to expand their reach, it’s time to consider multichannel retailing: listing products on multiple sales channels to gain more exposure and ultimately more sales.

A multichannel merchant will list their products on multiple online marketplaces (like Amazon, Walmart Marketplace, eBay, and Wayfair), a branded ecommerce site (often powered by a digital shopping cart like Shopify or BigCommerce), social media channels, and Google Shopping (through the Google Merchant Center).

If you’re beginning to see the limitations of selling through a single platform, this guide will help you identify the benefits of multichannel retailing for your business as well as next steps for adopting a multichannel strategy.

5 Reasons to Go Multichannel

  1. Multiple Touchpoints

Today’s shoppers have an endless number of choices, whether shopping online or in-store. And consumers are savvy — researching even small purchases to compare prices, read reviews, and watch unboxing videos before making a purchase. In fact, according to a study by Harvard Business Review, 73% of shoppers used multiple sales channels during their buying journey. This means that in order to stay top of mind for your best customers, you need to create multiple touch points to guide them through their journey.

  1. Eliminate Single Points of Failure

Multichannel retail also eliminates single points of failure in a merchant’s business model. Marketplace forums like Amazon Seller Central are rife with stories of sellers being booted for a simple misunderstanding of terms, in-store sales plummeted during 2020 lockdowns, and a security breach or backend failure on your ecommerce can quickly turn users away from an online store. Building a web of multiple sales channels decreases risk by eliminating a single point of failure in the sales funnel.

  1. Expand Market Share

While most shoppers are using multiple channels in their shopping journey, not all shoppers are frequenting the same channels. In order to get in front of all of your potential customers, your products must be available where your customers are already shopping.

  1. Increase Brand Awareness

It’s unlikely that a shopper is ready to make a purchase at the point of their first interaction with your brand. A complete multichannel ecommerce strategy includes retargeting ads on social, partnerships with influencers to build brand equity, and positive reviews on marketplaces. Together these efforts build brand awareness and ensure that your brand is top of mind when consumers do decide to purchase.

  1. Drive Up Profit Margins

Not all sales channels have the same profit margin, which may lead you to believe that you should avoid less profitable channels. Less profitable channels, however, can be leveraged to drive traffic to more profitable ones. Amazon, for example, tends to have higher overhead and advertising costs, but 66% of shoppers begin their product search on Amazon. Without having a presence on Amazon, you could be missing out on the opportunity to introduce your product to those shoppers at the beginning of their purchasing journey.

But although many shoppers are using Amazon as a product search engine, they aren’t necessarily making their final purchase there. Amazon can be a platform to introduce your brand to new shoppers and direct them to your more profitable channels like your ecommerce storefront, where you likely carry more products that aren’t available in your Amazon store.

How to Go Multichannel

Most ecommerce experts agree that the best approach to adopting a multichannel model is to first master your primary channel. Whether your business started out on Amazon or its own website, it’s important to really understand your customer base, have a following of brand advocates, and iron out your internal processes before adding additional sales channels.

Clearly, the more channels you add, the more complicated day-to-day operations of managing your business. However, there are tools and partnerships that can automate and simplify the sales process and supply chain. Below are three tips for streamlining your approach to multichannel retailing.

  1. Consider a multichannel listing software:

A multichannel listing software will simplify and automate many of the day-to-day processes of managing multiple sales channels. Most of these softwares will integrate with all of your sales channels through a single easy-to-use dashboard that shows a high-level overview of all of your product listings. The dashboard’s reporting will help you assess which of your channels are performing best and why.

Your multichannel listing software should also allow you to perform bulk uploads of product listings, automatically populating each channel with compliant content so you can launch new products quickly and simultaneously across all channels.

Many multichannel listing softwares also offer automatic repricing functions so you can stay competitive across sales channels. However, it may not always be in the best interest of your business to rely on automatic repricing. Winning the buy box may not always be worth cutting your margins, and it takes a human touch to know when to under-cut competitors and when it may actually be better to raise prices.

  1. Find a multichannel fulfillment solution:

Evolving customer expectations around fulfillment and delivery already poses a challenge to many small to mid-sized merchants. The added complexity of managing fulfillment across multiple channels may feel like an insurmountable task for quickly-growing businesses. For this reason, most multichannel merchants choose to outsource their fulfillment to a 3PL or similar fulfillment partner.

Finding the right multichannel warehousing and fulfillment partner will lessen the operational burden on your internal team, allowing you to focus on your core competencies like product development, marketing, and customer service. It’s important to find a partner that prioritizes technology to integrate seamlessly with your current tech stack and allow you to monitor and manage your fulfillment and delivery across all channels through a single platform. Looking for a multichannel fulfillment solution? Reach out to a supply chain expert at Ware2Go.

  1. Develop a multichannel marketing strategy:

When working with a limited inventory across multiple sales channels, it’s important to align your marketing strategy with your inventory availability across each channel. Pushing paid advertising to an out-of-stock product listing wastes advertising dollars and results in a frustrating customer experience. By finding a fulfillment solution that integrates with your multichannel listing software, you will have the ability to quickly view inventory levels across all channels with integrated demand forecasting to minimize missed opportunities and allocate more marketing dollars to the appropriate channels.

This is a guest post by Ware2Go

Ware2Go Bio:

Ware2Go, a UPS company, offers a nationwide on-demand fulfillment network and integrated tech platform that enables merchants of any size to offer one-to-two- day shipping. Ware2Go’s flexible fulfillment solution is helping merchants build smarter fulfillment networks to increase service levels while controlling final mile delivery costs.

Omnichannel Inventory Management

Posted on by Kaylyn Perry

Some of our favorite brands have created a legacy omnichannel presence. From Starbucks to Nike, to Disney, the move away from the traditional multichannel selling method of “product first, customer experience second”  is dying off and for good reason. Now more than ever, customer experience is becoming the driving force for product purchasing. Ecommerce business owners should be looking at ways to unite their customer buying experience and move towards omnichannel selling.

But what is truly the difference between omnichannel and multichannel? Don’t they just mean selling on multiple marketplaces and platforms? Well kind of, but in very different ways.

Omnichannel by definition means multi-channel selling and buying, united by a holistic approach to customer experience; omnichannel accounts for the spillover between channels and nurtures the customer journey in and between those channels. In essence, omnichannel allows the customer to have complete control over where and when they buy.

Building an omnichannel presence is easier said than done. With most ecommerce businesses starting on Amazon, it can be hard to find a way to properly link and unite the customer experience across different channels and budget the capital necessary for these changes. Additionally, it can be a large change to your business operations, which you as a leader may not be able to navigate properly.

Without the right technology and business development help, omnichannel presence is impossible. Thus, making it harder to scale your business.

Omnichannel vs Multichannel

To fully understand the benefits of omnichannel, it is important to know the differences between each.

Both omnichannel and multichannel have become hot buzzwords in the ecommerce industry. While they both mean selling across multiple platforms, they approach the customer experience differently. Omnichannel seeks to unite the customer buying experience while multichannel focus on the products. It is more commonly seen in retail brands that move online. Alternatively, Clearinity also sees multichannel standards in brands that start on Amazon and want to move towards selling on multiple marketplaces and shopping carts.

So, where does multichannel falter in the customer experience? It treats each channel as a “silo” or disjointed from the rest of the channels.It does not allow the customer to purchase from anywhere and often drives the customer to its competitors. Compared to omnichannel, multichannel is often seen as the simpler choice as it requires fewer resources. The downside is that it is often harder to track inventory and finances because of the disjointed nature of each platform. When ecommerce owners look at each channel as a “silo” they are in essence disjoining the operations as well, since they are relying on each channel to have consistent traffic creating less efficiency and more room for communication errors to occur in the fulfillment process.

Alternatively, omnichannel offers the opportunity to be in the customer’s preferred choice wherever they are in the buying process, no matter what channel they’re often in. It allows the customer to choose when and where to buy and that freedom allows them more opportunity to purchase from you. This also means that your operations become more holistic as the customer experience no longer relies on how that particular channel operates but rather how you as a brand operate.

The caveat to omnichannel presence is that it often requires a heavy investment in technology and a strategic plan for change. When done properly companies can move away from rules and standards of each marketplace and begin to have more business controls back in their hands instead of the channels.  Ecommerce business owners who are contemplating omnichannel selling must look at their inventory management, supply chain, and technology infrastructure for success.

Inventory Management & Technology for Omnichannel Selling

Inventory management seems like a no-brainer when it comes to talking about selling on multiple platforms. However, here at Clearinity, we see too often ecommerce business owners who take a shotgun approach and begin to start selling on every channel possible without the proper platform research, inventory management knowledge, and technology to support them.

Inventory management is critical for success when selling omnichannel. Omnichannel means you will need to have a firm grasp on not only your financial projections but also your stock levels for a successful customer experience. In addition, your customer service team will need a united workflow that allows for ultimate transparency in your fulfillment process. This will prevent delays in your pick, pack, and ship processes providing the customer the ease and convenience they desire.

Technology should be and IS your friend when thinking about starting to go omnichannel

Inventory management software systems such as DEAR, LOCATE, or Katana MRP can all help you navigate your stock levels, supply chain management, and customer service requests under one roof. It will ultimately help your products get to your customers faster, easier and thus increase loyal customers.

In conjunction with increasing your customer base, smoothing out your fulfillment process, and ultimately increasing demand for your products, inventory management systems will allow you access to your financials in one place so you can make critical business decisions more efficiently and effectively. No more spreadsheets and no more guessing on your stock forecasts, access all your data in one place in real-time.

Technology sounds like a no-brainer, and it should be however with the right team helping you. With the right team, they can also support you through the larger infrastructure changes that implementing an inventory management system creates and requires. Additionally, the right team will ensure that your team is fully supported throughout the process, creating a smooth transition and the ability to prioritize appropriately.

Simplify & Scale

Ecommerce business owners looking to move towards the omnichannel approach must consider these core questions:

  • What is my budget?
  • What is my timeline?
  • Do I have enough hands-on-deck to make this change possible?
  • Who will support me through this change?

Answering these questions will allow you to make the smartest business decisions that align with your overall growth strategy. In addition, those that are looking to scale and simplify their business are looking at inventory management systems as their first step and talking to their accountants and experts to find the best-suited platform for them. Fortunately, Clearinity has made it easy to consult with experts on ways to make this the most effective change for your business. Drop us a question in our contact box and we look forward to connecting with you to growth hack your business.

This article originally appeared on clearinity.com, our guest post author, and is re-published with permission.

How to Borrow Money for Inventory Needs

Posted on by Kaylyn Perry

While largely justified, the word “debt” carries a negative connotation. However, in order to grow, businesses would sometimes need to take out a loan to be able to invest in necessary expenses such as purchasing additional equipment, bolstering marketing and advertising efforts, as well as buying commercial property for expansion. And, when it comes to restocking inventory, it’s no different. In this article, we will discuss the ins and outs of inventory financing as well as alternative financing options to keep your inventory stocked during peak sales periods. Let’s dive right in!

How can an inventory financing loan help your business?

An inventory financing loan is a type of asset-based loan that allows businesses to leverage their inventory to acquire a business loan. This type of business loan may come in the form of a short-term loan or a line of credit that businesses can use to purchase inventory. Usually, inventory loans are used by small to medium-sized businesses as a short-term financing solution to replenish inventory during spells of high consumer demand. If you’re wondering how an inventory financing loan can help your business, check out some of its advantages below:

  • Provide the necessary funding for inventory purchases
  • Easier to qualify for compared to other types of business loans
  • Enables a business to prepare for busy shopping seasons
  • Allows a business to use inventory as collateral
  • Prevents stockouts

Factors to consider before borrowing money for inventory purchases

Nowadays, businesses have a plethora of financing loans to choose from. Depending on the purpose, business owners can pick and choose loans that are designed for a specific business expense. For instance, commercial loans exist so that businesses can acquire new property for expansion projects. But before deciding on which type of business loan to apply for, it’s important for businesses to consider the different factors involved when taking out a loan.

Do you have a business plan?

One of the most common requirements when applying for any type of business loan is a business plan. A business plan showcases how knowledgeable you are in your chosen industry as well as conveys your plans for growth. It also gives your lender an idea about the foundation of your business and how sustainable your operations are. Expect your potential lender to look at your projections as well as other relevant financial documents to gauge whether you have the funds to pay back the loan.

How much funding do you need?

Before applying for a loan, it’s important to identify how much you can afford to borrow as every business has its own complexities and unique needs. Think about the amount that you can afford, consider the monthly payment, and, most importantly, review the total amount you’ll end up paying back.

Know your credit score

Your credit score tells your lender how risky you are as a borrower. Most financial institutions look at a business’ credit history as the main metric when deciding your creditworthiness. Lenders also use your credit score to determine what interest rate to give you. Remember, the higher your score, the more favorable your interest rates will be.

Look for a nice balance between rates, terms, and fees

A loan with a low interest rate is great. However, borrowers should also consider the terms and fees that come with it. Make sure to find an interest rate with sensible payment terms. After all, choosing the lowest interest rate wouldn’t make sense if you’re going to repay it for a longer period, right? In addition, borrowers should also ask their lenders about hidden fees to avoid paying more than what they have bargained for.

How to apply for an inventory loan?

In order to secure an inventory financing loan, a business must be able to meet the following criteria:

  • Must be in business for at least one year
  • Must be a product-based business
  • Must have a reliable inventory management system
  • Must be able to provide accurate financial statements
  • Must be able to prove that the business is profitable
  • Must be able to provide information about credit history

Disclaimer: By no means is this a comprehensive list of requirements you have to meet to qualify for an inventory loan. Requirements and qualifications would vary from one lender to another. Please do your research!

Can I borrow money for my inventory purchases with bad credit?

The short answer is yes, you can. If you currently have bad credit, an inventory loan is one of the few loans that you may qualify for. Contrary to popular belief, it is still possible for businesses with poor credit to qualify for additional business financing in the form of an inventory loan. The only downside is that lenders have full authority to take possession of your inventory if you become unable to pay back your loan. This standard practice is in place to protect lenders in case a borrower defaults on a loan.

What are the different inventory financing business loans?

There are two main types of inventory financing: an inventory term loan and an inventory line of credit. An inventory loan is granted as a lump sum while an inventory line of credit is offered as a revolving fund that can be accessed again as needed. But, unlike a line of credit, a borrower that has used all the funds from an inventory loan may need to go through the entire application process again to be able to get another round of funding.

What makes an inventory loan attractive to businesses is the accessibility it offers. Both types of inventory financing business loans help small to medium-sized businesses provide better customer experience by keeping their most popular items in stock during peak shopping seasons.

Alternatives to an inventory financing loan

Note that inventory business loans are just one way to finance inventory purchases. If you don’t think an inventory financing loan is right for your business, you should also consider:

Merchant cash advances

A merchant cash advance is a financing option that involves lenders granting cash advances to businesses in exchange for an agreed-upon percentage of future credit card sales. The advanced amount, payment terms, and factor rates are typically discussed and decided by the borrower and the lender before the cash advance is approved.

Business credit cards

A business credit card, like a line of credit, enables small businesses to access a revolving fund with a set limit. Before considering a business credit card, it’s important to note that since business credit cards are usually unsecured (which means they are not backed by collateral), it may come with higher rates and fees.

Crowdfunding

Crowdfunding is a method of raising money to finance projects and business ideas. Businesses that need capital may collect money from a large number of people through the use of third-party online crowdfunding platforms. This method lets businesses tap into a wider investor pool and enjoy a more flexible way to raise capital. If you’re seriously considering crowdfunding to fund your inventory financing needs, you should check out Kickfurther.

Can Kickfurther be a great option for inventory funding?

If you have exhausted other financing options, Kickfurther can be a great way to acquire additional funding for your inventory needs. Kickfurther is an online inventory funding platform that provides businesses the necessary funds that they cannot access through traditional sources. Kickfurther applies a unique twist on the crowdfunding phenomenon by inviting individuals to become backers whenever a business needs to replenish its inventory.

Individuals looking to earn money may choose which business to send their money to and how much money they are willing to give. The business will then offer a rate of return and a specific repayment period to the buyers. After an agreement has been made, businesses are required to submit sales reports and present accurate documentation that details the payment for each individual for every inventory sold.

Wrapping Up

When studying different business loans, the best tip that we could give you is to shop around for the most favorable rates possible. However, don’t focus too much on the interest rate. Rather, find the sweet spot between a reasonable interest rate and a convenient repayment period. At the end of the day, taking out a loan is a huge financial decision – wouldn’t you feel more accomplished if you have done everything you could do to get the best possible deal for you and your business?

How Startups Can Grow Their Business with Inventory Financing

Posted on by Kaylyn Perry

Did you know that there are several startup financing options available to different kinds of businesses? After all, even the most successful companies struggle with poor cash flow from time to time. Without sufficient cash flow, businesses are forced to cut costs which could limit their growth opportunities.

As a business owner, wouldn’t it be great to have some sort of financial cushion that can be used to purchase additional goods to meet customer demand? The good news is that there are easily obtainable loans out there that businesses can access at any given time. One of them is inventory financing.

What is inventory financing?

Inventory financing is an asset-based loan simply based on the value of your inventory. This type of short-term financing enables businesses to use their inventory as leverage in getting either a term loan or a revolving line of credit. Inventory financing is often used by small to medium-sized businesses to support them through seasonal cash flow fluctuations while also ensuring that their most popular items are always on stock.

When applying for an inventory financing loan, one of the most important things to take into account is your inventory’s loan-to-value (LTV) ratio. As a rule of thumb, most lenders set an LTV of 50% to inventories pledged as collateral. For example, 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.

What type of startups require inventory financing?

As mentioned above, most businesses use inventory financing as a short-term solution to cover poor cash flow. More often than not, these businesses deal with large inventory quantities which could form a significant part of a company’s current assets. This financing approach is suitable for businesses that experience high inventory turnover rates such as retailers, restaurants, distributors, wholesalers, and manufacturers.

Is inventory financing right for your business?

The best person to ask is… you! As an entrepreneur, it is important to have an understanding of the various financing options you can avail of in case your business becomes strapped for cash. Any kind of business, regardless of size, will experience cash flow issues at one point or another. Thankfully, an inventory financing loan would help cover your inventory procurement needs so that you won’t have to spend money allocated to other important operating expenses such as payroll, rent, and utilities.

If you’re still wondering whether inventory financing fits your business’ current needs, ask yourself the following questions:

  • What’s your inventory turnover rate like?
    • It may not be advisable for companies with a low inventory turnover rate to avail of an inventory financing loan as the repayment period is usually shorter compared to other forms of business loans. If it takes a while for you to sell your goods, an inventory loan may not be the best business loan for you.
  • Do you have a great inventory management system in place?
    • Having a great inventory management system in place would not only help your chances of getting an inventory financing loan but would also speed up the application process. One big downside to applying for inventory financing is the amount of time it takes to appraise a company’s inventory. If you already have an efficient system in place, chances are the review and approval process would be much quicker.
  • Are you looking for a short-term or a long-term financial solution to your cash flow needs?
    • Again, it’s important to remember that an inventory loan is mainly used as a short-term financing solution. Compared to a typical business loan, lenders may instruct borrowers to pay off their inventory loans over a shorter period of time. This means larger monthly payments that could do more harm to your cash flow than good. To avoid this, make sure to identify a loan amount that is within your means.

What should you look for in an inventory financing company?

It’s probably safe to assume that you’re here because you have been researching the ins and outs of inventory financing. If you think inventory financing is right for you, then it’s time to talk about what you should look for in a potential lender. At the end of the day, you only want to get the best deal possible from a reputable financial institution, right? To determine whether or not an inventory financing is right for your business, here are two important factors consider:

Reputability

According to a 2014 Ernst & Young survey, respondents said reputation plays a “very important” role in deciding whether or not to trust a financial service provider. A financial organization’s reputability shows you – the customer – that they can be trusted with your current financial requirements and, in the long run, the financial well-being of your company.

Fees and Interest rates

Does your potential lender offer competitive interest rates? Do they have reasonable fees associated with a startup business financing loan? When it comes to significant financial decisions, it’s only natural to prioritize how much you’ll pay in fees and interest rates as it would take a sizable portion from your profits. Fees and interest rates would also give you an idea if you can afford to take out a loan.

What are the different types of funding for startups?

The truth is, startup funding may be difficult to come by. The main reason why is that startups are considered “risky” by most financial institutions. According to the U.S. Bureau of Labor Statistics (BLS), 45% of new businesses fail during the first five years of operation. The biggest reason why they fail? Insufficient funding.

To ensure that does not happen to your startup, let’s check out the different types of funding available for you and your business.

Term loans

A term loan is simply a loan from a financial institution with a fixed repayment schedule. Startups borrow a lump sum from a lender and then pay the full amount back in steady increments over a set payment period. As one of the most common forms of business loans, a term loan can be a reliable funding option for startups. However, traditional term loans may be difficult to qualify for.

Lines of credit

A business line of credit works best if your business needs regular access to extra capital. Usually, lenders allocate a specified maximum amount of funding and borrowers can draw cash as they see fit and only pay interest on the borrowed amount – not the total amount available.

Business credit cards

A business credit card enables business owners to access a revolving line of credit in order to fund various business expenses. Like personal credit cards, a business credit card will also charge interest rates if the balance is not repaid each billing cycle. Keep in mind that business credit cards would most likely carry higher interest rates compared to other more traditional business loans.

Online loans

Unlike conventional funding options like term loans and lines of credit, online loans are not provided by traditional financial institutions such as banks and credit unions. Rather, online lenders specialize in more convenient and accessible funding for small to medium-sized businesses. While chances of approval, interest rates, and payment terms vary from one lender to another, online loans are generally easier to qualify for. However, expect higher than average interest rates as online loans are usually unsecured.

Crowdfunding

According to Investopedia, crowdfunding makes use of an online network of individuals to raise the necessary capital for businesses to expand or fund a new venture. Instead of taking out a bank loan or a line of credit, businesses can use crowdfunding by asking a large group of people for small amounts of money to meet a certain monetary goal. For a crowdfunding effort to succeed, companies must properly plan their strategy to capture the attention of their potential backers.

If you’re looking for a crowdfunding platform that would specifically address your inventory needs, you should explore KickFurther.

KickFurther applies a unique twist on the crowdfunding phenomenon by allowing businesses to scale their inventory expenses with the help of their community of backers. This innovative platform works best with businesses that are experiencing low cash flow but strong demand. This enables them to crowdfund from people that are interested in their product and, when the business sells its inventory successfully, investors get paid. For more information, visit Kickfurther’s website at www.kickfurther.com.

Crowdfunding Your Inventory: The Pros and Cons

As with any startup financing option, crowdfunding also has its own pros and cons. Let’s take a look at the benefits and drawbacks of crowdfunding to help you determine if crowdfunding is right for you.

Pros of Crowdfunding

  • Increased exposure for your company and your products
  • Tap into a larger audience
  • No equity – you maintain full control of your company
  • Timely access to funds (as long as the fundraising attempt is successful)

Cons of Crowdfunding

  • Always a risk of failure
  • Crowdfunding is rife with scammers
  • Takes a lot of time and resources to ensure success
  • Someone could steal your business idea (especially if your idea is not protected with patents)

Final Thoughts

While it’s true that most startups usually fail within the first five years, it doesn’t mean that it will happen to you. It’s important to understand that success would not happen overnight. The best course of action to take is to map out your business goals and strategically plan for your growth. It also helps to have enough knowledge about the different startup financing options you can avail of in instances where you’re looking to expand or need extra funds to cover unexpected expenses. It may be a painstaking process but if it’s for the success of your startup, it’s definitely worth it.

Benefits of Inventory Financing: What You Need to Know

Posted on by Kaylyn Perry

Not having enough cash on hand can hurt any kind of business. Even the most successful businesses are known to encounter a shortage of cash due to unforeseen circumstances. Business owners then turn to bank loans, lines of credit, or credit cards to cover their day-to-day operations. However, defaulting on these loans can severely impact a business’ credit score. Fortunately, if your business mainly deals with the sale of tangible goods, an inventory financing loan may help cover short-term needs with little risk.

What is inventory financing?

Inventory financing is a form of asset-based lending that enables businesses to pledge their inventory as collateral to be able to obtain a term loan or a line of credit. Through inventory financing, a business experiencing poor cash flow can acquire a much-needed cash injection to cover outgoing cash flow instead of waiting for inventory to be sold. The difference, however, is that a term loan involves a one-time payment while a line of credit can be accessed, paid, and accessed again as long as the borrower consistently pays the amount that they have borrowed.

When it comes to inventory financing, it’s important to bear in mind that your loan does not solely rely on the value of your assets. Rather, it depends on the loan-to-value (LTV) ratio set by your potential lender. An asset’s LTV is calculated by dividing the amount borrowed by the appraised value of the property being put up as collateral. As a rule of thumb, most lenders set an LTV of 50% to inventories pledged as collateral. This means that it is highly unlikely that you would get the full appraised value of your inventory when you apply for inventory financing loans.

What are the different types of inventory financing?

In this section, we’ll talk about the two main types of inventory funding to determine which one best fits your business’ current financial requirements.

What is an inventory loan?

This type of inventory funding is characterized as a short-term loan that businesses use to purchase additional inventory. An inventory loan comes in the form of an upfront lump sum that businesses have to pay based on the payment terms set by the lender. Businesses experiencing rapid growth and an increase in market demand should consider an inventory loan as it is often easier to acquire as opposed to other kinds of loans. However, business owners must remember that an inventory loan is often used as a short-term solution.

Compared to other business loans, inventory loans are repaid over a shorter period meaning larger monthly payments. Another downside of an inventory loan is that it’s a one-time payment. If you need another loan, you would have to go through the application process again.

What is an inventory line of credit?

Like other lines of credit, an inventory line of credit can be accessed by businesses to buy the inventory they need when they need it. A line of credit’s repayment terms differ from a term loan as you only pay interest on the amount that you have borrowed and not the total amount available. What sets an inventory line of credit apart from an inventory loan is when used properly, a business will be able to manage its cash flow better and reinvest the additional capital back into the business. But, like an inventory term loan, an inventory line of credit typically has interest rates that are much higher compared to other more traditional loans.

The Benefits and Drawbacks of Inventory Financing

As with any important financial decision, business owners must understand the different advantages and disadvantages of inventory financing for you to make an informed decision. Let’s talk about the pros and cons of inventory funding.

Inventory Financing Benefits

  • An inventory financing loan could be a short-term solution for a business’ cash flow problems.
  • Businesses can use inventory financing loans to expand product lines.
  • An inventory financing loan allows a business to stock up on inventory – getting ahead of potential inventory issues.
  • May be easier to qualify for since an inventory financing loan requires a borrower to pledge collateral.

Inventory Financing Drawbacks

  • An inventory financing loan requires an extensive due diligence process which can be as expensive as it is time-consuming.
  • Depending on the lender, an inventory financing loan may have high interest rates and high loan minimums.
  • Inventory loans can only be used to buy additional inventory and cannot be used for other purposes. For instance, you cannot use an inventory financing loan to consolidate debt, pay your employees, or cover other cash flow needs.
  • An inventory loan is collateralized by your inventory – this means that the lender can seize your inventory in case you default on the loan.

Who can use inventory financing?

Inventory financing, as the name implies, can be used by businesses that deal with tangible products. These include retail stores, wholesalers, distributors, and manufacturing companies that experience high inventory turnover rate. For a business to enjoy the myriad of inventory financing benefits, they 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 provide relevant and accurate financial statements
  • Must prove that the business is profitable
  • Must provide credit history and scores

Is inventory financing right for your business?

As the business owner, you would be the best person to gauge whether or not acquiring an inventory business loan would help meet your business goals. In general, inventory financing loans are sought after by small to medium-sized businesses that have exhausted other options to acquire additional funding. Larger companies with an established financial history would be better off with traditional bank loans that offer more favorable repayment terms as opposed to an inventory financing loan. Remember, the loan you’re applying for should depend on the type of business you have and what you’re looking for to accomplish.

Are there other alternatives?

Insufficient capital is one of the many roadblocks that business owners face when running a business. The great news is, depending on your business’ qualifications, you may be eligible for other types of financing that may be more favorable for your current financial requirements. Let’s check out some of the alternatives to inventory financing.

  • Traditional term loans – A term loan is a funding option offered by financial institutions such as banks, credit unions, and online lenders. What makes term loans popular is their predictable monthly costs as businesses can borrow a fixed amount of money and pay it back with interest over a set period of time. While it’s available to both start-ups and established businesses, term loans may be more difficult for small businesses to acquire if you have bad credit or poor cash flow.
  • Traditional lines of credit – Like term loans, traditional lines of credit are also offered by banks, credit unions, and online lenders. The great thing about this type of funding is that a revolving line of credit can be accessed and repaid either immediately or over time. Payment is also straightforward as you only pay interest on the amount that you take out rather than the whole available amount.
  • Business credit cards – While it’s true that this kind of financing may be easier to qualify for compared to other traditional financing options, business credit cards do not have the most flexible payment terms. The biggest advantage that credit cards have is that every purchase helps the borrower earn rewards, points, or cash back depending on the type of credit card that they have.
  • Angel investors – Angel investors are high-income individuals that provide the necessary funding for businesses in exchange for an ownership stake in a company. These individuals typically invest in a startup during its early stages – using their own money.
  • Crowdfunding – Crowdfunding is a relatively new method used by businesses, organizations, or even individuals to fund a business idea or an expansion project. Crowdfunding asks a large number of people, often friends, family, customers, and the general public, to donate their own money during a set period of time. Once the goal amount is met, businesses can take out the amount raised and use it however they want. If you’re interested in financing your inventory through crowdfunding, consider using Kickfurther.

How does Kickfurther help small businesses finance their inventory?

Kickfurther is a unique crowdfunding platform that helps businesses grow their inventory through fundraising efforts backed by the public. It is the first crowdfunded marketplace with the main objective of financing a company’s inventory needs. Kickfurther enables a larger and more cost-effective inventory production by enabling a true consignment inventory from people that support and believe in your brand and your product. If you think Kickfurther is the right financing option for you, learn more about their services by visiting www.kickfurther.com.

Key Takeaway

An inventory financing loan, if used properly, can be a great way to cover your business’ short-term funding needs. Make sure to shop around and study the different loan amounts and interest rates that you are able to qualify for to determine which type of loan makes the most financial sense for you and your business.

Tips on How to Finance Your Amazon Inventory

Posted on by Kaylyn Perry

Amazon sellers can qualify for financing or loans that can be used to purchase inventory. The ability to purchase more inventory can improve selection for customers and increase revenue. Amazon sellers that use inventory financing can benefit in many ways while growing their company faster. Financing inventory may also help sellers improve cash flow. Whether you are a new seller or well-established seller you should qualify for inventory financing. The first step to securing inventory financing is to learn about the various options available. Below we have provided easy-to-understand descriptions about different Amazon seller inventory financing options. Keep reading to explore valuable information you’ll need to know before applying for Amazon seller inventory financing.

How does Inventory Financing benefit Amazon sellers?

Financing inventory can benefit Amazon sellers while giving them a competitive edge. Inventory can be expensive to purchase and hold causing cash flow challenges. Financing inventory can improve cash flow and allow sellers to offer more products. Most Amazon sellers have inventory that will be stored in a warehouse for a while before being sold or delivered to customers. In addition, most suppliers want payment for inventory purchased at the time it’s ordered. This means it can be costly to purchase and store Amazon inventory. Sellers that use inventory financing may be able to order inventory in larger quantities at lower prices. Here are a few benefits of financing inventory. . .

–         Increased revenue

–         Improved selection for customers

–         Faster response to fill orders

–         More working capital

–         Expand business faster

What are the types of inventory financing options available for Amazon Sellers?

Amazon sellers can take advantage of a variety of inventory financing options. It’s important to explore various options and make an educated decision. While it may be overwhelming as you navigate through various options, enjoy the process. As your business grows you may want to use a variety of financing options or change your primary source of financing down the road. The better you understand financing options, the better business decisions you can make. Let’s compare different types of inventory financing available for Amazon sellers.

#1. Traditional Business Loans

While Amazon businesses can use traditional loans offered by banks and credit unions, they may be hard to qualify for with time consuming processes. The low advertised interest rates can be attractive but small businesses typically have low approval rates. If you are an established Amazon business or seller you may be able to qualify for a traditional business loan. In addition, if your business has other sources of income you may qualify for a traditional business loan. On Amazon, prices can fluctuate often and quickly. Finding a lender with a fast approval process and fast funding times can help your business take advantage of valuable opportunities.

#2. Credit Cards

Credit cards can be a resourceful financing option for new sellers. However, as your business expands you may need higher loan amounts. The other challenge that comes along with credit cards are higher interest rates. If you are going to use a credit card to finance inventory you should look for a credit card that offers a promotional 0% period. If you can purchase and pay off inventory within the promotional period this could be a smart financing option for new sellers.

#3. Using Your Own Personal Savings

Using your own savings or cash is the fastest and cheapest way to purchase inventory. However, before using your savings you should consider the possibility of running out of cash or encountering an emergency situation. Paying cash can be a safe option but there are some risks and limitations. While the interest-free and hassle-free option of using cash may be enticing, you may not have enough cash to finance all the inventory you need. In addition, you may sell inventory faster than expected and not have the cash to replace it fast enough. This can cause you to miss out on a peak window of opportunity.

#4. Amazon Lending Program

Qualified marketplace sellers can take advantage of the Amazon Lending Program. However, funding times can be slow and approval rates are low. Once you are approved for an Amazon loan the offer should appear in your dashboard as a one-time offer. In order to apply for the Amazon Lending Program, your business must be eligible. To find out if your business is eligible you can log into seller central and look for a message from Amazon Lending. Amazon can collect interest charges and loan payments directly from your earnings.

#5. Personal loans

Personal loans may be suitable as a temporary inventory financing solution. If you are a new seller or have credit challenges you may want to consider a personal loan. Personal loans can be easier to qualify for than other options. When you are approved for a personal loan funds are typically issued as a lump sum with no spending restrictions. The downside to personal loans is they may have higher interest rates than Kickfurther, Amazon Lending Program, or other options. Most banks, credit unions, and online lenders offer personal loans.

#6. Kickfurther

Kickfurther can help new and well-established Amazon sellers secure inventory financing easily. Kickfurther innovates a unique approach to crowdfunding that allows retailers to give people the chance to buy inventory on consignment. The retailer provides supporters with an estimated timeframe for repayment and specified rate. Retailers can set a repayment schedule between 2-10 months depending on their expected cash flow. Supporters are repaid in full plus dividends. If you are an Amazon seller that wants to use Kickfurther you should have $150,000 or more in sales. Kickfurther can help sellers receive inventory loans between $50,000 to $500,000 as fast as 1-hour.

Which Amazon Inventory Financing Option is Best For You?

Selecting the Amazon inventory financing option that is best for you relies heavily on the size of your business and growth goals. If you are a new Amazon seller you may want to start with cash or a credit card or a combination of the two. Sellers may also want to consider using personal loans to finance inventory purchases. While personal loans may not be a suitable long term financing option they can help sellers get started. If you are having trouble accessing traditional funding sources we highly recommend checking out Kickfurther. In the current market online sales are reaching an all time high but funding is becoming harder and harder to secure, especially for small or new businesses. Kickfurther offers an extremely attractive platform for Amazon sellers to secure inventory financing.

Can you get your inventory financed on Amazon with bad credit?

In most cases, the Amazon Lending Program does not check credit. This means that good and bad credit sellers may qualify for Amazon Lending.  Since Amazon collects money from sales and then disburses the appropriate amount to sellers there is less risk involved. Amazon can collect interest fees and loan payments directly out of your sales. If Amazon is not offering you inventory financing and you have bad credit you should look into a personal loan.

How Amazon Sellers Can Apply for an Inventory Loan

If you are applying for a traditional business loan or credit card, you should select the lender you want to use and apply for a loan or credit card. Most lenders offer an online application process. If you are an Amazon seller that wants to apply through Kickfurther you will complete the form on their website. The form starts with basic information such as contact information, warehouse type, ownership, and annual revenue. After completing this form sellers can receive an estimate of funding potential. Kickfurther has funded 800 deals and counting totaling $50M in funding. Here are 4 easy steps to using Kickfurther for Amazon inventory financing…

#1. Create your online account

#2. Get funded within minutes to hours

#3. Customize your payment schedule

#4. Complete and repeat

Conclusion

In conclusion, Amazon sellers looking to finance inventory should consider Kickfurther. Originally launched in 2015, Kickfurther offers sellers a platform that allows them to raise money to purchase inventory.  The company was originally created after the owner’s personal experience struggling to finance inventory for a business. The options he found were expensive and complicated, encouraging him to offer business owners a better way to financing inventory. Kickfurther’s unique approach to crowdfunding can deliver fast funding up to $2M and flexible terms. Compared to other financing options, Kickfurther is up to 30% cheaper. Kickfurther allows sellers to pay back loans as inventory sells. Sellers can access funds when they need them to pay suppliers without needing a purchase order or invoice. In addition, sellers can create customizable repayment schedules based on expected cash flow. In order to qualify for Kickfurther your company should sell a physical product and have sales exceeding $150,000. Most companies that have used Kickfurthers platform have proven its success and flourished from its support. Every business deserves to take advantage of every opportunity. Kickfurther can help your business access the working capital it needs to take advantage of opportunities. Kickfurther has been praised by experts for their creative funding model that has helped business grow and survive tough economic times.

Discover Amazon inventory financing today. . . visit Kickfurther!