What You Must Know Before You Apply for Inventory Financing

Posted on by Amanda Levine

As the name implies, inventory financing is used by businesses to acquire goods that are sold at a later date. Inventory financing is useful for startups that have exhausted other efforts to secure financing or for small businesses with seasonal inventory. While easier to acquire,  it is important to note that inventory financing may present challenges such as higher interest rates and shorter payment periods.

Key points:

  • Inventory financing is a form of asset-based lending that allows companies to leverage their inventory when taking out a loan.
  • This type of financing option usually comes in the form of an inventory term loan or an inventory line of credit. 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.
  • Inventory financing loans are easier to acquire but may have less favorable repayment terms.

What are inventory loans?

If you are new to inventory loans, one of the most important things to understand is the concept of loan-to-value ratio (LTV). LTV is a risk assessment factor that lenders use to determine the risk of a particular loan. In simpler terms, the higher the value of your inventory, the more risk a lender is taking on by approving your loan.

Typically, businesses that apply for inventory loans receive up to 80% financing based on the appraised value of their inventory. In the event that a borrower defaults on a loan, the lender reserves the right to seize the purchased inventory and sell them to recover the lent capital.

As mentioned above, this type of asset-based lending uses a business’ inventory as collateral and usually comes in the form of a term loan or a line of credit.

What is an inventory term loan?

An inventory loan is a short-term loan that allows businesses to receive the full amount of money upfront to be used only for purchasing inventory. Like other term loans, an inventory loan should be paid back in fixed monthly installments over a predetermined time period.

What is an inventory line of credit?

On the other hand, an inventory line of credit is a revolving line that businesses can access as needed. What sets an inventory line of credit apart from an inventory loan is that it offers more flexibility especially for businesses that require funding for ongoing inventory purchases. 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.

When it comes to inventory financing loans, it is important to remember that the amount you can borrow depends on the value of your inventory and how much risk a lender is willing to take when lending you money. As a rule of thumb, most lenders set an LTV ratio of 50% to inventories pledged as collateral. However, it’s also possible that businesses may receive up to 80% financing depending on the inventory’s liquidation value.

Is inventory financing secured or unsecured?

Typically, loans fall into one of two main categories: secured loans and unsecured loans. The main difference between the two is that secured loans require borrowers to pledge collateral while unsecured loans do not. An inventory financing loan is technically considered as a secure loan since it is secured by a business’ inventory.

What are the most common reasons a business may require an inventory loan?

There are a number of reasons why businesses apply for inventory financing. Let’s take a look at some of the most common reasons below:

 Reason #1: To address cash flow issues

  • It’s a known fact that most, if not all, businesses experience busy and slow seasons. An inventory financing loan can help keep you afloat during periods of fluctuating demand.

Reason #2: To take advantage of bulk discounts

  • Who doesn’t like discounts? As a business owner, an inventory financing loan can help you take advantage of bulk discounts even if you are currently experiencing poor cash flow.

Reason #3: To acquire additional financing

  • It goes without saying that inventory financing is easier to acquire compared to other types of loans. If your business has had no luck after exhausting every avenue to acquire additional financing, then inventory financing may be right for you.

Does your business qualify for inventory financing?

If you’re serious about pursuing an inventory financing loan, you might be wondering if your business is qualified for this type of funding option. In general, the criteria for an inventory financing loan vary from one lender to another. However, you should at least expect to meet the following requirements in order to qualify:

  • Your business must be operational for at least one year.
  • You must be able to provide proof that your business is profitable.
  • You must be a product-based business with a reliable inventory management system
  • You must be able to present relevant and accurate inventory and financial records.
  • You must be willing to undergo a due diligence process that would involve an appraisal of your inventory.

Pro tip: To make sure that you qualify, speak with your potential lender directly to determine what their prerequisites are.

Pros & Cons of Inventory Financing

Businesses need steady cash flow to stay competitive. It’s now up to you, the business owner, to determine if inventory financing loans meet your business’s needs. To help you make an informed decision, let’s take a look at some of the advantages and disadvantages of inventory loans.

Pros of Inventory Financing:

  • An inventory financing loan may help businesses prepare for peak shopping seasons.
  • An inventory financing loan may help businesses that are trying to launch a new product.
  • An inventory loan also allows businesses to take advantage of bulk deals and other time-sensitive discounts.

Cons of Inventory Financing:

  • Business owners should expect a lengthy and expensive due diligence process when applying for an inventory financing loan.
  • An inventory financing loan may require high loan minimums and charge high interest rates.
  • When it comes to inventory financing, loans cannot be used for other financing needs. As you may have already guessed, inventory financing loans should ONLY be used to purchase inventory.

What are the costs associated with financing your inventory?

Like other forms of funding, an inventory loan also comes with its own set of fees.

  • Appraisal fees – Also known as an inspection fee, an appraisal fee is a payment for an independent appraiser that is tasked to assess the value of your inventory.
  • Prepayment penalty – A prepayment penalty is a fee charged by a financial institution if you pay your loan early.
  • Origination fees – An up front fee charged by a lender to process a loan application.
  • Late fees – A charge that borrowers pay when they fail to make a payment on time.

Keep in mind that the fees associated with inventory loans are determined on a case-by-case basis. This is by no means a comprehensive list of fees that you may encounter when applying for an inventory loan. Again, make sure to get in touch with your potential lender and ask what costs and fees are associated with your loan product before signing a binding contract.

What if applying for an inventory financing loan is not right for your business?

Insufficient capital is one of the many roadblocks that business owners face when running a business. The great news is, depending on your business’s qualifications, you may be eligible for other types of financing that may be more favorable based on your current financial requirements. If you’re open to considering alternative funding options such as angel investors, online loans, and crowdfunding – check out Kickfurther.

What is Kickfurther?

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.

Why Kickfurther?

Don’t pay until you sell

Your payment obligation only begins once your sales are made. This alleviates the cash-flow pinch that lenders cause without customized repayment schedules. And helps to free up capital to put into scaling your business without impeding your ability to maintain inventory.

30% cheaper funding

We cost less than factoring, PO financing, and many lending options. We also have higher funding limits.

Fund up to $1m in an hour

Once your deal is approved and goes live, most deals are funded within a day.

We can grow with you

Companies access higher funding limits and often get lower rates as they come back to Kickfurther. This creates a scalable solution that can grow alongside your company.

Final Thoughts

Whether you’re considering applying for a traditional bank loan or trying out inventory financing, you – as the business owner – will be the best person to determine what type of loan makes the most financial sense for you and your business. As with any important business decision, make sure to do your due diligence and get to know the ins and outs of inventory financing before making a decision.

Essential Customer Service Tips for Your eCommerce Business in 2021

Posted on by Amanda Levine

According to Microsoft, a massive 95% of consumers consider customer service as important for brand loyalty, so much so that over 60% of consumers have left a brand and switched to a competitor because of poor customer service.

Good customer service is also very essential for customer retention and improving customer lifetime value as 89% of consumers are more likely to purchase again from your business if you give them a positive customer service experience.

In a very competitive business world, it is more than necessary to invest in customer service and do it right from the word go because you may not get many chances to make it right as about four out of every five customers will not forgive a bad experience with a business they rate its customer service as very poor.

Here: let’s look at some essential customer service tips to help you grow your eCommerce business in 2021;

Table of Contents

  1. Personalize Customer Experience
  2. Be Proactive With Follow-Ups
  3. Use Customer Feedback To Improve Experience
  4. Employ An Omnichannel or Multichannel channel Strategy
  5. Incorporate Live Chat Functionality
  6. Optimize Your Website
  7. Conclusion

1. Personalize Customer Experience

Photo credit: Sargis Zubov on Istockphoto.com

Besides training your customer service team to interact with customers, they must also learn how to engage and relate with them. Personalizing your customer experience can help you attract untold customer loyalty to your brand.

Maximize Customer Data Technologies 

Ever thought about why modern email marketers always personalize messages like “Hey, Joe…”? It’s because they want to give them a human touch and stir up sentiments that would make you take action, inspired by the fact that they call you by your name and, of course, should have a good deal specially made for you.

Over 75% of consumers expect customer service agents to have visibility into their former interactions and purchases. Meanwhile, nearly 50% say agents only occasionally or rarely have the context they require to most efficiently and effectively solve their issue.

You can have better insight into your customers’ personalities and preferences through data gathered from their previous engagements or purchases. Bot Technology, location technologies, and various other solutions can help you gather pieces of information about a customer, treat them as individuals, and make them feel important.

Use location tracking software to know where they are and give them relevant details about delivery and your other business activities in that location. In addition, you can use the search history, favorite items info, or failed purchase data to personalize your customer service.

Pay Attention to Detail

Pay attention to the smallest details, even up to customers’ most insignificant comments and gestures (on voice and video services, respectively), and don’t act like they don’t exist! It will help your team to resolve customers’ problems better, satisfy them, and foster loyalty.

People will always be people. They don’t want another strict salesperson or service agent that only talks about sales and conversion: They’ve got that enough!

Take customer service outside the business terms and formalities:  to have a rapport with your customers. That can form the basis of sentiments for which customers will remain married to your business, so to speak.

You could also offer a piece of information or two about yourself, find common grounds, and leverage shared interests and values. Doing that can help you to humanize the experience better.

Do what many other eCommerce businesses are not doing. Personalizing emails for your customers on their special events like birthdays and other anniversaries can also greatly add some human flavor to your rapport with them, remove pre-service prejudices, and increase satisfaction.

2. Be Proactive With Follow-Ups

There are several ways to be proactive with your follow-ups. They are described in detail below:

  • Follow Up Immediately After a Purchase

It is very important to reach out to customers within the day of their purchase or a few days later. This helps to make your brand or business remain evergreen in customers’ minds.

However, a lot of companies are not doing this. They mostly automatically send out deals and promos many weeks after purchase, and by that time, they are almost always late as customers may not receive such promos with enthusiasm.

Your free offers and best deals are most likely to garner more conversions if you present them when customers are still high in the euphoria of a fresh purchase. At such times, even if they don’t buy, they recommend the deals or products to others.

  • Follow Up Immediately After a Customer Service Engagement

Another way to keep customers engaged and evoke enthusiasm is by reaching out to them with a deal, discount, promo code, or reward points to thank them for engaging with your business. 

For a customer to reach out to you, it means they want a better understanding of your business and its activities and want to connect better, and that must not be taken for granted. In the highly competitive business world, you want to end a customer service session on a positive and edifying note.

  • Follow up after An Issue Is Resolved

It’s often a common customer service mistake to put blame on customers or act like they are troubling you. Aside from the normal customer service ethics, it is imperative to reach out to them after a session as it assures them you didn’t just view their problem as another boring disturbance. 

Reaching out after an issue has been resolved also helps you know whether they are satisfied with the service. You can achieve this through a feedback survey or an email to show the customer you value their satisfaction.

3. Use Customer Feedback To Improve Experience

Photo credit: Picture on Istockphoto.com

Requesting feedback should be one of your signature customer service activities. Whether positive or negative, feedback can help you make several adjustments that will result in better and more satisfying customer service.

You also need to measure your customer satisfaction to improve it. It helps you know whether the customer was satisfied and whether the interaction with them was successful.

Various methods can help you measure customer satisfaction. However, most businesses use the CSAT (Customer Satisfaction Score) because of how simple it is.

The CSAT is commonly used in customer satisfaction surveys, and it often includes the question about how satisfied a customer is with an experience, usually on a scale of 1-5 or 1-10. Customer feedback can help you save, as you’d know where to invest in and from where to reduce or retract your focus.

It also helps you know what your customers are thinking about your brand and products and arms you with relevant knowledge to make a difference.

Also, the NPS  (Net Promoter Score) can help you know the likelihood of your customers recommending your business to others.

4. Employ An Omnichannel or Multichannel channel Strategy

Photo Credit: Blue Planet Studio from Istockphoto.com

An Invespcro statistic showed that businesses that operate omnichannel customer engagement systems retain 89% of their customers in contrast to a 33% retention rate for businesses with weak omnichannel systems.

Customers can be very volatile with their engagement and shopping preferences, and that can make them want to engage on a channel different from the one they used previously. Besides, customers’ preferences differ; one may prefer one channel to another, which necessitates a multichannel strategy.

A Multichannel engagement system allows you to interact with your customers using different channels, managed separately and with their respective strategies. However, omnichannel systems help to make sure the customers efficiently purchase items or connect with service agents.

For your customers to patronize your eCommerce business, it means they are very likely to be active across various social media channels. You’ve got to be there too! The idea is to be available—to be as close to your customers where they are.

What’s quite ridiculous is that more than 35% of customers expect to be able to reach out to the same customer service agent on any channel. However, it further gives credence to how invaluable a multichannel or omnichannel strategy can be.

Your business can greatly increase conversions through omnichannel marketing. After establishing your channels for contact, you must make your customers aware that they can reach you through those channels, and you must aim to provide top-notch customer service across all your channels.

5. Incorporate Live Chat Functionality

Photo credit: Ridofranz from Istockphoto.com

Live chat is now the top digital contact method for customers online, as a huge 46% of customers prefer live chat while just 29% prefer email, and 16%, social media.

Every modern eCommerce business should aim towards having a live chat system on its website to enhance communication with customers. That’s especially because incorporating live chat on your website helps you communicate with customers in real-time.

Live chat tools can help your sales team to connect with prospective customers as they browse your website. Your team can use them to get prospects to take action when they are still most enthusiastic about a product.

In addition, it creates another convenient channel through which you can reach out to people and vice versa—one that is on 24/7 and even AI-enabled, if you so desire.

CrazyEgg revealed that a good 38% of consumers have a greater likelihood to buy from a company that offers live chat support. Meanwhile, according to Emarketer’s discovery, 63% of customers had a greater likelihood to return to a website that incorporates live chat.

Patience is not a very common virtue among eCommerce buyers on average. They value their convenience and instant gratification such that they find a product quickly, place an order in a second, and expect it to be at their doorstep in a jiffy. And that’s why live chat tools are the closest match to such impatience.

According to Forrester, there was a 10% average order value increase in sales to customers who engaged in a chat before purchasing than those who did not. It’s also been found by ICMI that website visitors who engage with your business through live chat are 4.5 times worth more than those who don’t.

Another beautiful part of live chat is that it allows you to respond to as many as six customers at the same time—which cannot be said about the phone and email support with which you can only respond to customers one at a time. 

However, suppose your eCommerce website is yet to have a dedicated support team. In that case, you can still use live chat and integrate them with chatbots to keep assisting and engaging customers until an agent is available.

6. Optimize Your Website

Photo credit: Milindri from Istockphoto.com

Here are several ways you can optimize your eCommerce website and checkout process to enhance customer support and achieve your business goals:

  • Have a User-Friendly Website 

According to a study, 94% of negative website feedback was related to design. Your website must be easy to navigate for customers to enjoy their experience while browsing through your catalog for what they want.

You may like to know that a whopping 88% of customers online are less likely to revisit a website after a poor experience. That only validates the fact the internet may hand you many things but a second chance.

Work with professionals to build a well-organized eCommerce site that’s consistent with the latest trends. Leverage the most recent tools to make it aesthetically appealing and update it from time to time.

Want to see from customers’ eyes? Deploy a survey, or use review tools to know what your customers feel and what you may want to modify.

  • Optimize for Mobile

In 2018 alone, mobile eCommerce revenue constituted 50% of total e-commerce revenue in the U.S. Furthermore, a staggering 85% of adults expect the view of a company’s website on mobile to be as good or better on desktop.

Your mobile site experience must be tailored to meet customers’ mobile expectations, or at least come close. Reduce as many annoying pop-ups as you can, enable autofill across browsers, and scrap some unnecessary fields to enhance faster loading.

In the end, it’s all about making things easier and faster for your customers, and it pays off in greater brand loyalty and revenue.

  • Streamline Your Checkout Process

It may be extreme that 23% of online buyers would abandon their shopping cart if they need to create a new user account—because most eCommerce stores require that. However, it shows you that customers resent the least bit of stress during checkouts.

The checkout process on your eCommerce site should be made as simple as possible so that customers wind up on a positive note. Payments must be secure, and the shopping cart should be accessible from any page.

Quick takeaway: You may like to be as considerate as possible with your shipping and handling costs because, according to the North American Technographics Retail Online Survey, 44% of your customers would abandon their shopping carts due to high shipping and handling costs.

In addition, you can create a more comprehensive payment system to accommodate different customers’ preferred payment options. 

Generally, an optimized website and a streamlined checkout process can reduce the number of complaints received by your customer service agents and, instead, increase satisfaction.

Conclusion

The success of your eCommerce business in 2021 greatly depends on good customer service. Carefully and consistently practice all the customer tips listed above and watch your business transition to the brighter side. Congrats in advance!

This is a guest post from ARKA. Arka provides branded and unbranded boxes at the lowest prices and FAST, making it a one-stop shop for all your custom packaging needs. Just hop over to www.arka.com to get your boxes! P.S. you can order as few as 10 boxes with a dedicated designer on standby!

Guide to Multichannel Retail

Posted on by Amanda Levine

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 Amanda Levine

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 Amanda Levine

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 Amanda Levine

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.