How to Find Quality Overseas Manufacturing Companies

Posted on by Amanda Levine

As your business grows, you’ll review areas  where you can trim expenses without hurting product quality or brand growth costs. Labor, for most companies, is often the biggest business expense. So it only makes sense to move your production overseas where labor is cheaper, right? Well… it’s not that simple.

In this article, we’ll discuss why businesses opt to move their manufacturing overseas as well as leave you with some tips on finding quality overseas manufacturing companies.

Why do companies move manufacturing overseas?

In particular, why are U.S. firms moving manufacturing jobs overseas? Unsurprisingly, the main reason why companies move their production overseas is to save money on production costs. Many business owners will choose to move their manufacturing operations overseas if it means keeping production costs low without compromising the quality of products. Other factors such as lower costs of materials and skilled labor also play a vital role in a business’ decision to outsource their manufacturing needs. Outsourcing the production of goods offshore dramatically impacts a business’ margins—saving money on the procurement of materials, manufacturing, labor, and logistics.

Why is it cheaper to manufacture overseas?

As mentioned above, one of the biggest business costs is labor. Federally, the U.S. minimum wage currently sits at $7.25 an hour. If you think that’s already low, countries like China, the Philippines, and Vietnam have much lower labor costs ranging anywhere between $3 to $6 an hour. These countries offer discounted rates for bulk orders and offer a skilled labor force, all at a fraction of the cost.

Another important reason why it’s less expensive to manufacture overseas is fewer regulations. In the U.S., the reality is that complying with myriad regulations can dent a company’s resources as they adhere to multiple federal, state, and local laws and regulations. However, this does not mean that regulations in foreign countries do not exist. Rather, regulations are known to be more relaxed and flexible, enabling a company to operate with minimal interference.

How much cheaper is it to make things in China?

It depends. While it’s true that making goods in China is relatively cheaper because of lower wages, the type of product being made should also be considered. It’s important to note that labor is only a portion of a product’s cost; other factors such as the quality of raw materials, packaging, and logistics all play a role in the total cost of a product.

How do I find manufacturers overseas?

Finding the right overseas manufacturer can be an overwhelming task. Before hiring an overseas manufacturer, you have to consider a few critical components that would turn your idea into a tangible product. If you’re currently on the lookout for a manufacturing partner, here are some factors you should to take into account:

  • Don’t focus on the price

One common pitfall in overseas manufacturing is putting too much emphasis on the price. That might sound counterintuitive in an article about pricing, but here’s why it’s the top suggestion: If you want your customers to be happy, you must first consider the quality of assembly before anything else. Does your potential manufacturer produce sturdy products? Does the finished product pass the performance tests you envision to establish product quality? Ideally, you want your overseas manufacturer to supply you with quality products at a reasonable cost.

  • What are the taxes and regulations like?

Each country carries its own laws and regulations. As a business owner, it’s understandable that you don’t have the time to learn the ins and outs of business practices in another country. The solution? Consider hiring a sourcing company. A sourcing company will help you identify the best manufacturer for your product and ensure that the final product fulfills your expectations while navigating the regulations of the production country.

  • Find a partnership, rather than a one-off deal

When choosing between several overseas manufacturing companies, businesses often look for the best deal possible as opposed to looking for a lasting partnership. While selecting based on price is certainly understandable, businesses should look to build a business relationship with their overseas manufacturer. This assures that both parties are invested in each other’s success and can lead to greater success across years and multiple products versus hastily selecting a single manufacturer based on their initial quote.

  • To have a better idea, schedule a factory visit

For a business relationship to prosper, you need to spend time on the ground to connect with the people overseeing your overseas operations. Scheduling regular factory visits not only shows how serious you are about building a business relationship with your manufacturer but also gives you a deeper insight into your overseas production operations. Unable to travel but still want a physical presence with your suppliers? Some sourcing companies feature offices domestically and abroad so they can oversee production and lead negotiation locally.

The Top 9 Tips to Find Great Overseas Manufacturers

Understand your gross margins and strategy

It is essential to have a clear understanding of your gross margins and overall manufacturing strategy when choosing an overseas manufacturer. This gives you, the business owner, a better idea of your business’ financial health and allows you to develop a strategy to find a manufacturer that could address your production requirements.

Start learning about the manufacturing industry

One of the most crucial things to do when finding an overseas manufacturer is research. While researching seems simple to suggest, choosing the best manufacturer that would meet your company’s unique needs is a tedious yet necessary task. It is necessary for you to learn about the manufacturing industry and the type of manufacturer you are planning to work with. What type of clients do they have? What sorts of products do they make? What is their average turnaround time? Answering these questions will give you a clear idea about the potential benefits of working with a potential overseas manufacturer. Sourcing specialists can also help take the research tasks and present the best options, and they may even have a list of pre-vetted and trusted suppliers to choose from.

Due diligence is important

Speaking of research, another critical thing to do in the process of finding an overseas manufacturer is conducting proper due diligence. Reputable manufacturing companies will have no problem with providing you relevant information such as business licenses and product pricing. Your potential overseas manufacturer should also let you know if they subcontract work to other factories in the event that orders become unmanageable.

Find out their average turnaround times

Due to the nature of overseas logistics, expect that your products would have a longer shipping time versus something produced domestically. Partnering with a sourcing company can help ensure that the production of goods moves much faster to be able to meet important deadlines.

Check quality control practices

In manufacturing, quality control guarantees that products are well-built and are free from defects. Vetting a potential manufacturer’s quality control practices to make certain that customers would not be disappointed or be put at risk should be a priority. Using a product specification sheet (PSS) and inspection specification sheet (ISS) ensures the finished product matches the resiliency and use you had in mind during the design process. You’d be surprised how many water bottles get shipped but suffer needless leaks because proper testing wasn’t completed. Use a PSS and ISS to limit defective design and production.

Source from a country that offers multiple financial incentives

The general aim of these financial incentives is to acquire the investments of foreign companies. For instance, China has a multi-faceted policy in place that boasts affordable labor costs and a variety of other financial incentives directed toward foreign businesses. To successfully cut costs without compromising the quality of your products, it is imperative for you to equip yourself with enough information about the multiple financial incentives that you can take advantage of.

Have a clear product specification sheet with your requirements

Setting clear requirements and specifications minimizes the risk of a project’s failure. Make sure that you maintain open and honest communication between you and your manufacturer. When a manufacturer clearly understands what you are asking from them, they can create your product without complications from start to finish.

Understand the pros and cons of manufacturing overseas

Weighing the pros and cons of overseas manufacturing is a must before choosing your potential manufacturer. Here are some of the advantages and disadvantages of overseas manufacturing:

Pros of Overseas Manufacturing

  • Reduced labor cost
  • Cheaper raw goods and materials
  • Easy access to a skilled workforce
  • Fewer legal and economic regulations

Cons of Overseas Manufacturing

  • Risk of losing intellectual property
  • Quality control concerns
  • Minimum order quantities often involve large-scale orders
  • Longer shipping timeline

Conduct regular audits

This is a no brainer. It is essential for you to perform factory audits to improve the efficiency and productivity of your manufacturer. Factory audits also help businesses ensure that overseas manufacturers are compliant with the necessary laws and regulations. Audits show your overseas manufacturer that you are serious about ensuring the quality of your products as well as building a business relationship with them.

The main reason why companies manufacture overseas is… cost.

The truth of the matter is, producing goods in the U.S. can be expensive. If your business is already experiencing tight cash flow, outsourced manufacturing is one alternative ays to cut costs. Additionally,  the rise of specialized funding options for growing businesses can allow them to have their money go further and perhaps avoid outsourcing, or can add additional strength in combination with a new manufacturing strategy.

One financing option that companies can look into is Kickfurther. In a nutshell, Kickfurther is an inventory funding  platform enabling product  businesses to raise money for their inventory needs without tying up all available cash on hand in expensive inventory orders. With Kickfurther, you fund inventory to meet your need and trajectory but make no payments until inventory is available and sales begin. Kickfurther pays your manufacturer directly (and can reimburse you for recently produced inventory) and you set a payment timeline of one to 10 months based on your manufacturing and sales cycles. . If you want to learn more about Kickfurther, visit www.kickfurther.com.

Import & Export Finance: Getting Started

Posted on by Amanda Levine

Financial risk, navigating complicated laws, and addressing various trade regulations can be just some of the reasons why businesses hesitate to  explore international trade opportunities. Many local businesses also think that their operations are too small to be competitive in the international scene.

However, the data shows a different story.

According to the U.S. Chamber of Commerce, “98% of the roughly 300,000 U.S. companies that export are small and medium-sized businesses, and they account for one-third of U.S. merchandise exports. The number of small and medium-sized businesses that export has risen about threefold over the past two decades.” While the apprehension surrounding import and export is understandable, it’s important for businesses to understand that there are multiple trade deals and financing opportunities in place to protect their interests. But, to be able to expand into an international market, businesses often need funding. Let’s talk about import and export financing.

What is import financing?

Importing can be costly. When you decide to venture into the import business, be prepared to navigate through various legal and economic barriers that, more often than not, cost time and money. And, due to the nature of importing, the logistics between the purchase and the delivery of products are bound to introduce a number of changes or alterations to your overall operations and overall cash flow.

Fortunately, there is import financing. Import financing solves these issues by enabling businesses to get cash advances aimed at reducing the impact of importing on a business’ operational expenses. Import finance is a type of funding option offered by lenders to businesses for the purchase of goods from overseas suppliers.

How does import financing work?

Usually, there are three main parties involved in import financing: the importer, the exporter, and the lender. The lender’s primary function is to fund the operation while also minimizing the risk for both the importer and the exporter. When it comes to import financing, a sales agreement must be accepted by all parties in order for the funds to be made available and for the exchange of goods to proceed.

Depending on your agreement with your lender, import financing solutions can also cover other related expenses such as freight and tariffs. In some cases, lenders may even cover up to 100% of the good’s landed cost.

What is export financing?

Export financing is another type of funding that businesses can deploy to bolster their trading capabilities. As opposed to import financing, export financing involves transactions that support the sale of goods to foreign buyers. Primarily, export finance aims to support businesses that want to sell their products to an international market. For those looking to start an exporting business, there are a variety of financing options available that are suitable for businesses that want to meet international demand. But how exactly does it work?

How does export financing work?

Simply put, export financing is a form of asset-based lending that functions as a cash flow solution for exporters. The way export financing works is that lenders advance necessary funding so that exporters can cover their operational expenses while they wait to get paid. As mentioned above, the nature of exporting and importing involves complicated logistics and a lot of waiting — which means there are significant periods where no revenue comes in, pinching a company’s finances. Export financing solves this by letting small businesses borrow money against the amounts due from international customers.

How to get import and export financing?

When it comes to import and export finance, the chances of getting approved for funding vary on a case-by-case basis. Lenders typically look at factors such as personal and business credit scores, business plan, time in business, and other relevant financial documents. Keep in mind that the documents you would have to submit depend on the requirements set by your prospective lender and the type of import or export financing solution that you are trying to acquire.

5 key things to know about import and export financing:

As with all business-related sales transactions, being paid on time is key to keep your operations going. If you are seriously considering import and export finance as a means to fund your international trade operations, then here are five key things you need to know.

  1. Import and Export Financing vs Other Mainstream Financing Options

Applying for import and export financing does not mean you lack funds —it just means that you are protecting your business against the risks of international trade. Some of these elements include shipping risks, foreign exchange fluctuations, and other hidden fees and tariffs. For  businesses applying for more traditional financing options, they’re using funding for expansion operations, hiring more staff, and upgrading current machinery and equipment.

  1. How do import and export finance contracts differ from conventional ones?

The length of import and export finance contracts are usually shorter and more flexible compared to other conventional financing contracts. However, this still depends on the total loan amount and the repayment terms that have been agreed upon by the lender and the borrower. In transactions with multiple processing phases, repayment terms can be longer and may have a different structure to ensure that the borrower has adequate funding to cover day-to-day expenses.

  1. What are the different types of import financing?

There are a variety of import financing methods that businesses can choose from based on their unique needs.

  • Letter of credit – A letter of credit is considered to be one of the most important aspects of international trade. It is issued by a bank and serves as a guarantee of complete and timely payment of debt to another party. A letter of credit protects both buyers and sellers from multiple risks involved in international trade.
  • Bank guarantees – While similar to a letter of credit, bank guarantees are often used to cover payments if a transaction does not go as planned. Bank guarantees are often activated when the other party to the transaction does not fulfill the conditions outlined by the contract.
  • Asset-based lending – This refers to loans or lines of credit secured by a business’ assets, such as accounts receivables and inventory. Some of the most common forms of asset-based lending are inventory financing, invoice financing, purchase order financing, and receivables financing.
  1. What are the different types of export financing?

There are a number of export financing options available to small businesses. The U.S. Government even has loans offered through the Small Business Administration (SBA) and the Export-Import Bank dedicated to financing a business’ exporting needs. Traditional financial institutions such as banks and credit unions also offer their own variety of export financing loans.

Basically, export finance can be categorized into two main classifications: pre-shipment export financing and post-shipment financing.

  • Pre-shipment export financing – Pre-shipment export financing is provided by a lender against either a confirmed export order or a letter of credit. Customers receive funds in advance and may be used to pay for operating expenses.
  • Post-shipment export financing – Since it takes time to receive payment from buyers, exporters can access post-shipment financing after fulfilling the order of an overseas buyer. Without this type of financing, exporters would have to wait weeks or sometimes even months to receive payment.

How import and export loans can help your small business

The main advantage of import and export finance is that it helps protect your business from the various risks surrounding international trade. Import and export loans also serve as a source of working capital to keep your business and cash flow strong even if payments from your international trade dealings are taking a while to arrive.

Are import and export loans a good fit for your business?

It depends. It’s worth noting that import and export loans are a good option for businesses that do not want their own money tied up in shipments that could take months to arrive. Small businesses, especially those that have been operating for less than a year, often have limited access to traditional loans and other forms of financing. As such, many of these businesses turn to other types of financing such as taking out a term loan from an online lender or crowdfunding.

Are there other alternative financing options for import and export businesses?

One alternative financing option that helps businesses overcome some of the financial strain of import and export schedules  is Kickfurther. Kickfurther funds between $20,0000 and $1,000,000 of inventory for product brands selling across any distribution channels. As an importer or exporter, Kickfurther’s funding model accounts for transit periods and solves the delay between paying for inventory and receiving it for sale. Costs begin as low as 1% per month and brands often experience falling costs each successive use of Kickfurther inventory funding. Here’s how it works:

  • Brands illustrate a history of proven sales ($150,000 in trailing 12 months)..
  • Enter product information, including costs, and supplier information..
  • Structure a payment timeline based on your expected sales cycle. With Kickfurther, you don’t begin payments until sales begin.
  • Once approved and funded, receive funding in just days..

This model more intuitively fits the cash flow cycles and needs of growing brands and can support faster growth for  import and export businesses.

Wholesale vs. Retail Financing for Businesses: What You Need to Know

Posted on by Amanda Levine

In the midst of the global pandemic, businesses – even those with the strongest cash flow – face varying levels of uncertainty brought about by current economic conditions. As a business owner, the type of financing assistance you apply for will have a lasting effect on the future of your company. It’s important to equip yourself with the necessary knowledge about the different capital options available to you and other creative ways to address your business’ cash flow shortage.

If your business deals with the distribution of a large number of goods or the sale of goods or services directly to the end-user, then you clicked the right article. Let’s talk about wholesale and retail financing for businesses.

What is wholesale finance?

Wholesale financing is the practice of using a company’s assets as leverage to be able to borrow additional capital for a wholesale business. This type of asset-based lending addresses recurring cash flow concerns as well as provides a business with enough cash on hand to fund an expansion project, hire extra personnel to meet seasonal demand, or accelerate marketing. Wholesale financing can also be used to improve a wholesale business’ purchasing power when buying large amounts of goods and materials for resale. Like most business loans, note that you may have to pledge an asset as collateral in order to secure financing.

From agriculture to the garments industry, wholesale financing is a great funding option for a wide range of industries. Whether you are trying to acquire more funding for a new warehouse or a new product line, wholesale financing can help you cover sizable purchases without hurting your business’ regular cash flow.

What are wholesale loans? Is it different from wholesale financing?

Financial jargon, from the outside looking in, can be confusing to say the least. In business, wholesale financing, wholesale lending, and wholesale loans all refer to loan products available to wholesale companies for various types of expenses. Regardless of the type of products you sell, having access to additional capital is important for any growing business with quickly evolving needs. Having enough working capital gives a company the much needed financial flexibility to meet short-term or long-term business goals.

What are the pros and cons of wholesale finance?

To determine if wholesale financing is right for your business, it’s important for business owners to equip themselves with enough knowledge about the different benefits and drawbacks of this type of financing. Let’s discuss the pros and cons of wholesale financing.

Pros

  • If your business consistently posts strong sales, wholesale financing may be faster and easier to obtain compared to other conventional loans.
  • Wholesale financing helps increase a business’ cash flow – enabling it to better manage operational expenses and other cash flow needs.
  • Wholesale financing enables businesses to purchase mass amounts of inventory and take advantage of bulk purchasing at a lower cost.
  • The borrower can decide when and how to use additional cash acquired from wholesale financing.
  • Borrowers may take out a term loan or a line of credit depending on their business’ current financial needs.

Cons

  • Wholesale financing may be difficult to qualify for depending on the current state of your financials.
  • Borrowers should be wary of hidden fees and other charges.

Why consider a wholesale business loan?

As a business owner, growing your operations and increasing your bottom line are some of your most important yearly goals. As the saying goes, you need to spend money to make money. A wholesale business loan enables wholesalers to purchase a significant amount of goods for resale. This cash injection gives businesses an opportunity to take advantage of buying in bulk – allowing them to save money as opposed to buying in smaller quantities. A wholesale business loan can also provide a financial cushion for businesses to restock inventory, expand product lines, and support other operational expenses.

How do I apply for a wholesale loan?

When it comes to loans, requirements and qualifications depend on your prospective lender. Most traditional lenders often require a plethora of documents for review while non-traditional lenders such as online lenders have more flexible qualifications. Typically, the process looks like this:

  • A business submits an application and provides the necessary documents required by the lender.
  • The application goes through a review process where lenders analyze the documents provided. Lenders may also require further documentation to supplement the loan application.
  • After the review process, lenders would usually require a borrower to commit to an agreement before proceeding to perform due diligence. This lessens the risk for lenders when appraising the collateral pledged by the borrower.
  • If everything looks good after the due diligence process, funds will be provided as soon as possible.
  • As for paying back your loan, repayment terms depend on the type of asset-based financing you applied for. For instance, if you chose a term loan, you would have to pay back the money you borrowed, including interest, over a set period of time. On the other hand, if you opted for a business line of credit, you only have to pay for the amount you borrowed and the agreed-upon interest that comes with it.

Disclaimer: This is by no means a comprehensive step-by-step list of a wholesale loan application as the application process depends on the type of lender and the type of loan you are applying for.

What is retail finance?

As the name implies, a retail business loan is a product offered by a financial institution geared toward retail businesses. Retail financing can be used to maintain, manage, or expand a retail business. From covering emergency expenses to taking advantage of the bulk pricing of goods, a retail business loan can be used for a variety of purposes. It can also provide financial support that businesses need to grow and expand.

What are retail loans? Is it different from retail finance?

Retail financing is a catch-all term used to describe loans specifically designed to meet the financial requirements of retail businesses. A retail loan can be secured or unsecured. Secured business loans involve a borrower putting up collateral which the lender may seize in case the borrower defaults on the loan. Unsecured retail business loans, on the other hand, are not backed by collateral. However, since unsecured loans do not require collateral backing, borrowers may encounter higher interest rates and a shorter payment period.

What makes retail financing great is that it can be used by retailers for a plethora of purposes. This type of financing option can be used by businesses to restock inventory, hire more employees to meet seasonal demand, invest in marketing efforts, upgrade machinery and equipment, or finance unforeseen expenses.

What are the pros and cons of retail financing?

Here are some of the pros and cons of retail financing:

Pros

  • Can be used to pay for a wide range of business expenses
  • Strengthens a retail business’ cash flow
  • Competitive interest rates
  • There are a variety of lenders that offer retail financing for small businesses

Cons

  • May require collateral
  • May be difficult to qualify for if you are a new business

Why consider a retail business loan?

A business’ working capital may become erratic due to the general nature of the retail industry. Here are some of the most common reasons why retailers consider a retail business loan:

  • Purchase inventory – Without sufficient inventory, how will a retailer meet customer demand? Retail business loans can help cover costs for purchasing additional inventory, especially in peak shopping seasons.
  • Manage cash flow – A retail business loan helps promote good cash flow management. This ensures that your business has enough outgoing cash to pay for business expenses.
  • Invest in new technology – Investing in technology that will add value to your business is always a good idea. Technology can play a key role in boosting a business’ productivity and automate certain tasks to reduce labor-intensive work.
  • Hire seasonal help – A retail store business loan should be able to cover seasonal business expenses such as hiring seasonal help to ensure that your store is operating seamlessly during busy seasons.

How do I apply for a retail business loan?

Unfortunately, there is no single best method when applying for a retail business loan. Your loan application will heavily depend on the type of loan you are trying to acquire, what industry you’re in, and the type of asset(s) you are willing to put up as collateral. Generally, expect your lender to take a look at your credit history, debt-to-income ratio, cash flow, bank statements, as well as other relevant financial documents that would support your loan application.

Wholesale Loan vs. Retail Loan: What Is the Difference?

With so many different lenders and loan programs available in the financial market, it’s difficult to keep track of which type of loan may apply to you. When it comes to wholesale and retail loans, the biggest difference lies in accessibility. Wholesale loans are provided to third-party correspondent lenders such as banks and credit unions while retail loans are developed by a financial institution and can be provided directly to the borrower.

Are there alternative financing options for wholesale and retail financing?

What if we told you that you have another option for your funding needs? Retailers, wholesalers, and anyone starting a business dealing with large amounts of inventory would benefit from exploring the many benefits of KickFurther. Kickfurther applies a unique twist to the crowdfunding phenomenon for wholesalers and retailers that want to raise money to purchase additional inventory.

Kickfurther helps you grow with inventory fundraising from your supporters and fans. When you sell your inventory successfully, you pay your buyers, not the bank. Simple, right? If you want to know more about Kickfurther, visit their website at www.kickfurther.com.

Conclusion

At the end of the day, you – as the business owner – will be the best person to determine what type of loan makes the most sense for your business. While it’s true that there are plenty of financing opportunities to choose from, the most important thing is to know what your business needs as well as the differences between the various loan products that you can qualify for. In doing so, not only will you be able to choose the best financing for your business but you will also save money in the long run.

Inventory Financing: What Is It and How Does It Work?

Posted on by Amanda Levine

Updated June 9, 2026. Originally published May 19, 2021.

Quick answer

Inventory financing is funding that product businesses use to buy inventory they’ll sell later, with the inventory itself serving as collateral. It usually takes the form of a short-term loan or line of credit, and it lets growing brands order enough stock to meet demand without draining their cash. Costs and qualification vary by provider.

In running a growing business, one of the most common issues businesses face is inconsistent or poor cash flow. Simply put, cash flow is the amount of cash (or cash equivalent) moving in and out of a business during a time period. There is a difference between cash flow challenges and a recurring negative balance, which often points to a more substantial business issue.

Cash flow challenges can be caused by seasonality, when your business or products sell heavily during one season. For many consumer packaged goods (CPG) companies, they can also occur when making inventory purchases that leave bank accounts thinner until cash from new inventory is realized. To avoid this cash pinch when ordering inventory, many companies shrink their order size. Yes, this avoids the cash flow pinch, but what does it do to a company’s growth when they know they could sell more than they’re ordering?

Understanding that this dilemma strikes at the ability of young companies to grow, there are steps companies in high-growth mode can take to seize growth opportunities without abandoning financial health. For CPG brands whose largest cost is inventory, inventory financing can resolve the cash flow dilemma without sacrificing either growth or company finances.

What is inventory financing?

Inventory financing is a funding option tailored to product businesses to acquire inventory for later sale. The funded products serve as collateral against the funding. This model often lets smaller or younger companies access the larger financing that traditional lenders reserve for enterprise clients, and it’s a strong option for quickly growing companies with increasingly larger and more frequent manufacturing runs.

How does inventory financing work?

Inventory financing comes in the form of a short-term loan or a line of credit that businesses use to purchase inventory. Lenders will often consider the type of inventory and your sales data to set the specifics of the loan.

Who can use inventory financing?

Inventory financing is a popular option for retail stores, wholesalers, distributors, and manufacturing companies. To secure an inventory loan, a business must often meet the following criteria:

  • Be at least one year in business or meet a revenue threshold
  • Be a product-based business with a reliable inventory management system
  • Be able to provide detailed and accurate financial statements
  • Be able to certify that the business is profitable
  • Be able to provide credit history and scores

What documents are required for inventory financing?

After gauging whether inventory financing would work for your business, the next step is to prepare the documents required to apply. Keep in mind that requirements may vary from one provider to another.

  • Business plan
  • Personal and business credit history and scores
  • Personal and business tax returns
  • Relevant personal and business financial documents (balance sheet, profit and loss statement, sales forecast, and cash flow statements, among others)
  • Inventory list and estimated value
  • The appraised value of the inventory

How to prepare for an inventory loan

Applying for an inventory loan can be simpler and quicker than other types of traditional loans. However, that does not mean it’s easier to acquire. If you think inventory financing is right for your business, here is a step-by-step guide to help you prepare your application.

Step 1: Compile relevant financial documents

When reviewing a loan application, financial institutions need an overview of your business operations to decide whether you will be able to pay back a loan. Some of the standard documents you would need are personal and business bank statements, tax returns, credit history and scores, and a list reporting the estimated value of your inventory.

Step 2: Prove efficient inventory management

You should have a well-organized inventory management system in place when applying for an inventory business loan. Proper inventory management makes it easier for your lender to get an overview of your inventory. It also gives your lender an idea of your inventory’s turnover rate, how much profit you are expecting, and the products you are unable to sell.

Step 3: Establish your credibility

Inventory financing typically requires a more thorough due diligence process than other business loans, because lenders need to make sure your inventory is a valuable asset. During the assessment period, a third party will be tasked to appraise your inventory and audit your inventory management system. The initial costs of this process vary based on the products in your inventory and the size of your facility.

Step 4: Review loan offers and wait for final approval

Once your application is complete, the lender will provide a loan offer specifying the loan’s amount, interest rates, and payment terms. After reviewing and signing an offer, you then wait on confirmation from the lender.

What are the benefits and drawbacks of inventory financing?

As with any important business decision, a business owner should weigh the potential benefits and drawbacks of inventory financing side by side. Here’s a quick look at both.

Benefits Drawbacks
Resolves a business’s cash flow challenges Potentially more setup costs because of a thorough due diligence process
Increases potential for higher profit Can be difficult to qualify for
Expands product lines Higher funding minimums
Helps you get ahead of potential inventory issues Requires POs

What costs are associated with inventory financing?

Like other forms of funding, inventory loans come with fees. Remember, these are some of the fees you may find, and not all lenders charge each or any of them.

  • Appraisal fees — also known as an inspection fee, this is a payment for an independent appraiser tasked with assessing the value of your inventory.
  • Prepayment penalty — a fee charged by a financial institution if you pay your loan early.
  • Origination fees — an upfront 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.

Is inventory financing right for my business?

As the business owner, you know best. If any of the cash flow challenges or seasonality mentioned above affect your business, inventory funding may be worth exploring. It is important to understand that, due to the nature of inventory loans, if you become unable to pay your loan, your inventory may be seized by your lender.

What inventory type makes good collateral?

There’s no single inventory type that makes better collateral than others. Ultimately, it’s the lender that establishes the value of your inventory to determine the funding amount based on its appraised value.

How does Kickfurther compare to traditional inventory financing?

Traditional inventory financing and Kickfurther both help product businesses buy the inventory they need to grow, but they work differently. Here’s how they compare.

Traditional inventory financing Kickfurther
Typical qualification Often one or more years in business, proven profitability, strong personal and business credit, and detailed financials Physical product businesses with at least $200K in annual revenue and POs from large retailers
How you repay Fixed payments on a short-term loan or line of credit, often beginning right away A custom payment timeline based on your expected sales cycles
Cost structure Interest, plus possible appraisal, origination, prepayment, and late fees A fixed cost of capital; volume-ordering discounts can help cover funding costs
Funding range Varies by lender, often with higher minimums  Up to $2M+ in inventory
Best for Established product businesses that can meet bank-style underwriting Growing product brands that want payments matched to sales cycles

As a small business, you have a variety of options when it comes to financing. Whether you need an inventory financing loan or another form of business funding, there are a number of tools available to help you get the capital you need. If you sell a physical product with a minimum annual revenue of $ 200,000, Kickfurther may be able to combine the best aspects of inventory financing with the flexibility of modern alternative financing.

Types of Inventory Financing: Loans & Line of Credit

Posted on by Amanda Levine

Properly managing your inventory is crucial to ensure customer success and stable profitability. After all, inventory is the most essential part of any product-oriented business. As part of a company’s current assets, products in your inventory can also be used as collateral whenever your business needs a quick injection of cash. If your business posts strong sales but you keep having difficulty securing enough capital to meet your growth needs, then an inventory financing loan might be the most reasonable funding option for you. But what exactly is inventory financing?

What is inventory financing?

An inventory financing loan enables businesses to purchase inventory and keep shelves stocked. Often, a small business that applies for an inventory financing loan needs a short-term or medium-term cash flow solution to ensure they meet consumer demand and capitalize on growth opportunities.

Inventory funding is flexible and uses the inventory you purchased as collateral in case you become unable to repay your loan. For example, a car dealership may apply for inventory financing to purchase more cars to sell. In the event that the dealership defaults on its loan, the lender is protected by the collateral and can seize the purchased cars to recoup loan losses.

What are the different types of inventory financing?

Historically, business owners could choose between two types of inventory financing: an inventory loan and an inventory line of credit. While both types of inventory financing options use a business’ inventory as collateral, they can be used in different ways.

What is an inventory loan?

Inventory loans are short-term loans businesses can use to purchase needed inventory (due to stockouts or  adding a new distribution partner, for example). An inventory loan is provided in the form of an up-front payment that business owners later pay back based on the conditions provided by the lender — much like many types of common loans. This type of inventory financing loan is well suited for product-based small businesses.

What are the pros and cons of an inventory loan?

Here are some of the advantages and disadvantages of an inventory loan.

Pros of an inventory loan

  • Comes in the form of a lump sum
  • Paid back in monthly installments
  • Interest rates are often fixed
  • Funding arrives quickly once you have been approved

Cons of an inventory loan

  • The process for acquiring inventory financing can be expensive
  • May carry higher interest rates compared to other forms of small business funding
  • Often a higher minimum loan amount (can be a con for some and a pro for other businesses struggling to find higher funding)
  • Review and approval can take several weeks to allow proper due diligence
  • Purchased inventory is used as collateral

Does an inventory loan make sense for your business?

Businesses that are growing and experiencing an increase in demand should consider an inventory loan as an accessible financing solution to their funding needs. As businesses grow, their inventory orders become larger and they develop new costs; inventory funding can help ensure a business is able to both order sufficient inventory to meet trajectory and invest across other areas as needed with growth. As mentioned above, inventory loans may not be the lowest-cost financing option due to how banks price risks on these loans,but they may feature higher funding limits that help produce inventory at levels other loans cannot Unless  your product features very thin margins, an inventory loan, even if it has slightly higher costs, may be the fastest route to profitably increasing revenue, especially with an in-demand product or highly seasonal sales cycles. One thing to remember is that an inventory loan is a one-time lump sum payment and if you need another loan, you would have to go through the application process again.

What is an inventory line of credit?

An inventory line of credit is another form of short-term loan often used by businesses to buy the inventory they need when they need it. Like other lines of credit, businesses can access the credit line and only pay interest on the amount borrowed and not the total amount available.

What are the pros and cons of an inventory line of credit?

Here are some of the advantages and disadvantages of an inventory line of credit.

Pros of an inventory line of credit

  • You only pay interest on the total amount borrowed, not the total amount available
  • Predictable monthly costs
  • More flexible compared to an inventory loan
  • Can be accessed repeatedly as long as you pay back the amount you borrow
  • Once everything has been finalized, funding can be accessed as soon as possible

Cons of an inventory line of credit

  • Late fees may prove to be costly, as with most financing
  • Purchased inventory is used as collateral
  • Like an inventory lump sum loan, a line of credit’s due diligence process may be expensive and may take a long time

Does an inventory line of credit make sense for your business?

An inventory line of credit allows you to stock up on inventory in anticipation of busy seasons, or to purchase more inventory than cash on hand allows, or frees up your existing capital to spend elsewhere on the business. What sets an inventory line of credit apart from an inventory loan is that you can access your line of credit, repay what you borrowed, and then access again as needed. This type of inventory financing is perfect for businesses that need a reliable source of capital for their cash flow needs.

How can I apply for an inventory financing loan?

In order to secure an inventory loan, a business must often meet the following criteria, though keep in mind that all lenders differ and these represent some known criteria:

  • Must be at least one year in business or meet a revenue threshold
  • Must be a product-based business with a reliable inventory management system
  • Must be able to provide detailed and accurate financial statements
  • Must be able to illustrate the business is profitable
  • Must be able to provide credit history and scores

What is the difference between an inventory loan and an inventory line of credit?

The main difference between an inventory loan and an inventory line of credit is their accessibility after initial distribution from a lender. An inventory line of credit can be accessed again and again as long as you are paying back the amount you have borrowed. However, an inventory loan is a type of term loan with a one-time payment.

Alternatives to inventory financing

There’s another form of inventory funding that borrows from the strengths of an inventory loan while improving overall terms, adding customized payment timelines, lowered costs and a streamlined application. Kickfurther inventory funding features no up-front costs, no application fees and no initial inventory inspection. Kickfurther funds your inventory purchase and you pay back later as inventory begins to sell — not immediately as with other loan types. You can fund $20,000 – $5,000,000 in inventory in just days at costs beginning around 1% monthly and 30% lower than competing products.

Key Takeaway

Be sure to review multiple funding options. Some options may appear inexpensive in the short term but carry higher fees later or feature lower overall funding. Other options can provide the fastest funding, but that comes at a cost. Compare the scenarios and review how each fits the cash flow you expect as you don’t want to be saddled with high payments before revenue from new product arrives, for example. For experienced assistance comparing or stacking multiple funding options, contact Kickfurther today for help understanding all your options.

Six Ways To Be a More Savvy Wholesale Buyer

Posted on by Amanda Levine

Tundra has a community of thousands of buyers who are always looking for more ways to confidently grow their business and make smarter buys. Some of the questions we often receive are around retail best practices for tracking metrics as well as tips for sourcing products. So we’re bringing in experts to share their advice with our buyers!

Q: What are the top retail metrics and reports that buyers should always be tracking?

Understanding retail math and reporting is something that many brand owners put off, because they don’t feel confident in reading them. Three of the most important report categories to understand and read regularly are:

  1. Sales Reports: What is selling the best per category (for example, fashion tops/graphic tees/sweaters + denim/bottoms/dresses + accessories/shoes/jewelry), what vendors are selling through the best, what sizes, sales by day/hour/week/month/team member, and finally sales by channel (social, online, live, in-store, vendor events).
  2. Inventory Reports: Aging (how old is the inventory on hand), BOM and EOM inventory (how much inventory do you have on hand total, and in what categories), Open to Buy (Based on next month’s projected sales less the inventory on hand, what do you have open to buy in each category)
  3. Financial Reports: P+L (profit and loss which is income minus expenses) and balance sheet (assets, liabilities)

While it may seem like a long list, a weekly date with your numbers will keep you up to speed and help you become a smarter buyer.

Q: Buyers would love to know what to look out for when placing an order with a wholesale supplier — what are the most important factors to consider?

There are many best practices that we’ve observed as we’ve worked with savvy buyers in the Tundra community. Three things buyers should do when considering suppliers:

  1. Ensure you can see a track record of quality

Everyone always knows product quality is important but it’s not always clear how to evaluate it. You may find it helpful to place a sample order to see if it meets your bar or just buy into the MOQ, but you’re really only getting information based on one order. It’s also important to establish if a supplier is able to deliver on time consistently. That’s why on Tundra we developed a platform that provides buyers with customer reviews which show what products look like when they’re received by real buyers. We also provide supplier metrics like actual lead times and percent on-time delivery.

  1. Push for clarity and transparency in pricing

Wholesale pricing can often be complicated and there are many hidden costs like freight charges, sales tax, customs fees and so on. This isn’t an issue on Tundra as we calculate everything for you before you check out. However, if you’re buying directly from a supplier or working through a distributor, make sure you know what the fully landed cost is. This way you won’t get hit with extra charges you didn’t expect. And if you’re seeing these additional costs creep in, that’s a red flag.

  1.  Get to know the brand authentically

Invest some time getting to know the brand beyond what’s in their linesheet — learn what differentiates them from their competitors, what SKUs have good sell-through and how best to merchandise their products. This enables you to make smarter buys for your store. It also helps you recommend the right products to your customers. On Tundra, we’ve made it easy to access more information about suppliers with our posts and #tags functionality. Brands can post content that’s helpful to wholesale buyers directly onto our site so you have all the relevant information at your fingertips.

TUNDRA

Tundra is the modern wholesale marketplace that allows independent businesses to freely transact, scale and thrive. We sell and deliver products directly from US and Canadian brands to savvy businesses around the world. By eliminating transaction fees and markups, we empower our community of buyers and suppliers to keep reinvesting in their growth.

Want more information about Tundra? Connect with their team here: https://tundra.grsm.io/kickfurther