Small Business Financing: 7 Ways to Secure Funds

Posted on by Kaylyn Perry

Getting a small business up and running isn’t easy. You’ve got to identify your niche, find the right product sources, and manage inventory carrying costs, among many other challenges. 

One of the toughest is securing the funds needed to cover daily expenses and still be able to invest in growth opportunities. Let’s explore several financing options you’ll want to consider for your microenterprise. 

Why do you need small business financing?

Small business owners often face hurdles in generating capital, as they lack the option to sell stocks or bonds like larger corporations. Limited access to funds prevents them from buying in bulk, leading to higher production costs per unit. The lack of purchasing power further restricts their ability to negotiate favorable deals with suppliers, which could otherwise lead to reduced costs and savings. These can affect pricing competitiveness and profitability. 

Low cash reserves also make it harder for microenterprises to compete against larger companies that can provide better employee benefits and have bigger marketing budgets. 

By securing more funds, microenterprises can boost their cash flow to become more resilient to ongoing business pressures, improve efficiencies, and scale.  

7 small business financing options

Here are some popular ways to get the small business funding you need. 

1. Inventory funding 

Small businesses often struggle to get traditional financing due to limited credit history, insufficient assets to back up loans, or unsteady cash flow. Inventory funding from specialized financial institutions gives you access to financial support using your inventory as collateral. Buyers fund the inventory on consignment, so you don’t have to pay until you sell and get paid yourself. 

Pros:

  • Best if you have heavy inventory needs (funds are typically a percentage of the inventory).
  • Doesn’t put personal assets at risk (unless a personal guarantee is involved)
  • No need for a strong credit rating 
  • Fast processing 

Cons:

  • Value of the inventory limits the funds 
  • Rates vary from the highly competitive to the not-so-favorable. (However, Kickfurther, an innovative inventory financing platform, provides the opportunity to lock in your annual servicing cost.)

2. Traditional business loans

Business loans, typically from banks, give a lump sum that you pay back over a predetermined period. This type of financing usually requires collateral, such as real estate, vehicles, and equipment. 

Pros:

  • Offers low-interest rates 
  • Can’t be used for any purpose except those specified by the terms
  • No need to repay early and in full

Cons:

  • With stringent eligibility requirements.
  • Lengthy application 
  • The loan amount depends on your collateral (Real estate and savings are preferred because they have stable prices and higher liquidity.)

3. Business lines of credit

Lines of credit provide flexible access to funds up to a set limit from which you can draw as needed. This can be secured, using assets as collateral, or unsecured, without requiring collateral but possibly at higher interest rates. You can get this from banks, credit unions, and online lenders. 

Pros:

  • Pay interest only on funds used
  • Can be used flexibly  

Cons:

  • Offers lower loan amounts compared to traditional bank loans.
  • Can have double-digit APRs (although they’re lower than credit cards)  
  • Slower turnovers mean smaller loans

4. Revenue-based financing 

Revenue-based financing provides your business with capital, and, in return, you commit a portion of your future gross revenues. This means you pay back the borrowed amount plus fees from your sales until you pay back the total amount. 

Pros:

  • Flexible payments that adjust with your income
  • No collateral

Cons:

  • Not available for pre-revenue companies.
  • Small business funding amount is tied to revenue 
  • The required monthly payments limit cash flow

5. Merchant cash advance (MCA)

MCA is small business funding that gives an amount upfront in exchange for a portion of your future income or debit or credit card sales. The lender withdraws from your business bank account daily or weekly based on your sales. 

Pros:

  • Fast and easy processing 
  • No collateral
  • Sales-based payments, so  you have some flexibility during slow periods

Cons:

  • Fees can be very high
  • Daily or weekly payments can strain cash flow
  • Less regulated, which can lead to unfavorable terms

6. Credit cards

Business credit cards give you a revolving line of credit. This allows you to make purchases up to a certain limit and pay back over time, with interest on any remaining balances. 

Pros:

  • Offers flexible use 
  • Earns you rewards and cashback on purchases
  • Helps your business build a credit history

Cons:

  • Higher interest rates if balances are not fully paid
  • May require a personal guarantee
  • Costly annual fees and penalties for late payments

7. Trade credit

Trade credit is a buy-now-pay-later arrangement between businesses. Your supplier allows you to purchase goods or services on account, usually within 30-90 days. This form of credit is common in B2B transactions, such as in wholesale and manufacturing industries.

Pros:

  • Improves cash flow by delaying payment for supplies
  • Strengthens supplier relationships, which can lead to better terms
  • No interest if you pay within the agreed period

Cons:

  • May have restrictive terms (e.g., might require immediate repayments)
  • May damage business relationships long term if payments are late
  • Strict supplier terms can impact business operations during tight financial conditions 

 

Choosing the best small business financing solution

To find small business funding that’s a good fit for you, evaluate your cash flow, revenue, and expenses. Determine the capital you require to grow at the pace you want, and review your financial projections. Lastly, compare your options by considering interest rates, fees, repayment terms, and your ability to meet these terms. Also, consider consulting with reputable financial advisors. 

 

If you’re searching for suitable financing, inventory funding may be exactly what you need. But, to ensure optimal inventory funding to satisfy the demands of your small business, you must choose the right partner: Kickfurther. 

How can Kickfurther help?

Kickfurther is a trusted, long-term growth partner built by founders for founders. 

We’ve resolved the difficulties of managing the cash flow cycles between producing and selling consumer goods we experienced as CPG founders. We offer these distinct benefits:  

  • No immediate repayments – Do not pay until your product sells. Other providers may debit your account daily as part of a repayment schedule. Loans require repayment before your sales cycle has even begun. With Kickfurther, you control your repayment schedule.
  • Non-dilutive – We don’t take your equity. We do not require equity in your business to access inventory funding.
  • Not a debt – This is not a loan, so it does not put debt on your books, which can further constrain your working capital/access to capital or lower VC valuation.
  • Quick access – You need capital when supplier payments are due. Kickfurther can fund your entire order(s) each time you need more inventory. 

Say ‘yes’ to opportunities when lightning strikes, and stay ahead of demand with fast, flexible funding for up to 100% of your inventory. With Kickfurther, remain in full control of your business. Contact a Kickfurther expert to find out how it works.

A Guide to Purchase Order Financing for Apparel Businesses

Posted on by Kaylyn Perry

If you are in the fashion business, you know that cash flow is king and that staying ahead means having the right financial strategies in place. But what if you’re struggling to secure the funds needed to keep your apparel business flourishing? This is where purchase order financing comes in. In this article, we’ll take you through the fundamentals of purchase order financing, empowering you to make informed decisions that drive your apparel business forward.

Understanding Purchase Order Financing: How Does it Work?

Purchase Order Financing is a specialized form of funding designed to help businesses, including apparel companies, fulfill large orders when they lack the necessary capital. It provides funds upfront, bridging the gap between production costs and customer payments. It’s beneficial for businesses experiencing rapid growth, seasonal fluctuations, or those with limited access to traditional financing options.

So how does purchase order financing work, exactly? 

When a company receives a sizable purchase order but lacks the necessary capital to cover production or procurement costs, a financing entity steps in. It typically provides a cash advance to the supplier or manufacturer, allowing them to fulfill the order. Once the goods are delivered to the customer, the financing entity collects payment directly, deducts its fees, and then forwards the remaining balance to the business. This straightforward process empowers companies to seize growth opportunities without being hindered by financial limitations, making purchase order financing an invaluable resource for optimizing inventory management and expanding operations.

Benefits of Purchase Order Financing for Apparel Businesses

Purchase order financing offers a lot of advantages, especially to apparel companies. It helps these businesses: 

Overcome Cash Flow Challenges

Apparel businesses frequently receive large purchase orders from clients or retailers as they grow and expand their market presence. However, these businesses also encounter cash flow hurdles, particularly when required to finance production costs upfront before receiving client payments.

Purchase order financing effectively mitigates this challenge by furnishing the essential capital to cover production costs. This ensures seamless order fulfillment and revenue generation, enabling apparel businesses to meet customer demand and capitalize on sales opportunities without the fear of cash flow disruptions.

Manage Seasonal Fluctuations

Purchase order financing offers a strategic advantage to apparel businesses in managing seasonal fluctuations. During peak seasons, when demand surges and production costs escalate, companies often face strain on their cash reserves. With purchase order financing, apparel businesses can secure the necessary funds to ramp up production and meet heightened demand without depleting their working capital. This flexibility enables them to capitalize on seasonal opportunities, fulfill large orders, and maintain consistent operations throughout fluctuations in demand, ultimately fostering sustained growth and profitability.

Build Relationships with Suppliers

Purchase order financing plays a pivotal role in nurturing strong bonds between businesses and their suppliers. By offering upfront capital for production expenses, this financial tool builds trust and reliability. Suppliers are assured of timely payments for their goods and services, prompting suppliers to prioritize the company’s needs and potentially offer advantageous terms or discounts. Transparent and efficient transactions also enable smoother communication and collaboration, which in turn paves the way for mutually beneficial partnerships.

Enjoy a Flexible Financing Solution

Traditional loans or lines of credit often come with stringent eligibility criteria and fixed repayment terms. On the other hand, purchase order financing offers flexibility tailored to the specific needs of apparel businesses. 

For instance, Kickfurther offers purchase order funding at an estimated 30% lower cost than alternate lenders, ensuring you can fund your entire purchase order every time you need more inventory to fulfill your client’s needs. With this option, you can secure funding quickly and efficiently, with repayment typically tied to the proceeds from the completed sale of goods.

Scale Operations

Apparel purchase order financing scales alongside the growth of the business, enabling companies to fulfill increasingly larger orders as demand expands. This scalability is particularly beneficial for startups and emerging brands seeking to establish a foothold in the market and build a reputation for reliability and quality.

Expand Market Presence

To remain competitive in the apparel industry, businesses must continually innovate and adapt to changing market trends and consumer preferences. Purchase order funding facilitates product innovation and market expansion by providing the capital needed to develop new designs, launch marketing campaigns, and penetrate new markets. This allows apparel businesses to stay ahead of the curve, differentiate themselves from competitors, and capture market share.

Final Thoughts

Apparel purchase order financing stands out as a strategic choice for meeting the specific challenges of fulfilling large purchase orders because it leverages the value of confirmed purchase orders themselves. This means that businesses can access funding based on the strength of their sales pipeline, rather than relying solely on their financial history or asset base. 

Compared to other financing options, purchase order financing provides a targeted solution for securing the capital needed to fulfill orders and drive growth, while minimizing risk and maximizing efficiency.

How Kickfurther Can Help

Let Kickfurther be your trusted funding partner and get funding for up to 100% of your purchase orders at competitive rates. Fund your entire purchase order(s) on Kickfurther each time you need more inventory so you can put your existing capital to work growing your business without adding debt or giving up equity.

Still not convinced? Here are some more reasons why you should choose Kickfurther:

  • No immediate repayments: You don’t pay back until your new inventory order begins selling. You set your repayment schedule based on what works best for your cash flow.
  • Non-dilutive: Kickfurther doesn’t take equity in exchange for funding.
  • Not a debt: Kickfurther is not a loan, so it does not put debt on your books. Debt financing options can sometimes further constrain your working capital and access to capital, or even lower your business’s valuation if you are looking at venture capital or a sale.
  • Quick access: You need capital when your supplier payments are due. Kickfurther can fund your entire order(s) each time you need more inventory.

Kickfurther puts you in control of your business while delivering the costliest asset for most CPG brands. By funding your largest expense (inventory), you can free up existing capital to grow your business wherever you need it.

Ready to grow and scale your business? Create a free business account today, complete the online application, and review a potential deal with one of our account reps to get funded within minutes to hours.

A Strategic Guide to Purchase Order Financing for Startups

Posted on by Kaylyn Perry

As a startup, you’re no stranger to the constant struggle for capital—you know the financial roadblocks all too well. And with traditional funding options posing more barriers than solutions, it often feels like you’re hitting dead ends at every turn.

But there’s a less familiar path that could be your solution: purchase order financing. It’s a practical solution to the cash flow challenges many new and small businesses face, especially when dealing with large orders that could propel your business forward.

Let’s explore the ins and outs of purchase order financing—how it works, its benefits, and how you can leverage it effectively for your business.

Understanding Purchase Order Financing for Startups

Getting a loan may seem like a good idea, but traditional lending avenues often demand collateral or an established credit history—two things startups may not always have. This is where purchase order financing comes in.

Purchase order financing is a type of funding where a third-party company or individual provides the necessary capital to a business to fulfill a specific customer order. Instead of relying on the business’s own funds or traditional loans, the provider advances the money needed to produce or purchase the goods required to fulfill the order. Once the order is completed and invoiced, the fund provider is repaid along with a fee, and any remaining profits go to the business. It’s a useful option for businesses facing cash flow constraints or large orders they can’t fulfill on their own.

How Does Purchase Order Financing Work?

Purchase order financing involves multiple parties throughout the process; it entails the participation of the following:

  • The company – This is the business seeking financing to fulfill a purchase order.
  • Purchase order financing provider – The entity offering the financing. This provider validates your purchase order and disburses funds to the supplier.
  • Supplier – The company responsible for supplying or manufacturing the goods that you intend to resell or distribute. The supplier receives payment for its goods directly from the purchase order financing provider.
  • Customer – Those seeking to purchase goods from the company. In a purchase order financing setup, once your customer receives the goods, they typically remit payment directly to the financing provider.

Here’s a breakdown of the process:

  1. Get a purchase order (PO) from a customer

This is essentially a commitment from a customer to purchase goods or services from your business. It outlines the order’s details, such as quantity, price, and delivery terms.

  1. Assess the costs and potential profits

Once you have the PO, it’s time to evaluate the financial implications. Calculate the costs involved in fulfilling the order, including production, materials, labor, and any other expenses. Compare these costs to the potential profits to ensure the order is financially viable for your business.

  1. Apply for financing with a lender

If you lack cash or inventory to fulfill the order, apply for purchase order financing with a financing company, providing details of the purchase order and supplier costs.

  1. Get approval and receive funding 

The lender will review your application and assess the risk involved. The financing company may approve funding up to 100% of the supplier’s costs based on various factors like your business qualifications and customer creditworthiness.

  1. Use the funds to fulfill the order

With funding secured, you can now proceed to fulfill the purchase order. The financing company pays your supplier directly to manufacture and deliver the goods needed to fulfill the order.

Payment to the supplier can be made through a letter of credit, which guarantees payment upon satisfying certain conditions such as proof of shipment.

  1. Deliver the goods or services

Once the order is ready, it’s time to deliver the goods or services to the customer according to the terms outlined in the purchase order. This may involve shipping the products or providing the agreed-upon services.

  1. Invoice the customer

After delivery, you’ll send an invoice to the customer requesting payment for the goods or services provided and send a copy of the invoice to the financing company. The invoice should include details such as the total amount due, payment terms, and any applicable taxes or fees. 

  1. Keep the profits

The customer pays the financing company directly for the invoice amount. The financing company deducts its fees from the payment received from the customer and transfers the remaining balance to your business.

Costs, Requirements, and Other Considerations

Before committing to purchase order funding, it’s important to understand the associated costs, requirements, and other factors that may impact your decision:

Costs

Purchase order financing typically comes with fees and interest rates that vary depending on the financing company and the specifics of your arrangement. Common fees include application fees, processing fees, and discount fees. 

Requirements

Financing companies may have specific requirements that businesses must meet to qualify for purchase order financing. These requirements may include a minimum order size, a minimum monthly revenue threshold, or a certain level of profitability.

Repayment Terms

Understand the repayment terms of the financing arrangement, including the repayment schedule and any penalties for late payments. It’s crucial to ensure that your business can comfortably manage the repayment obligations without causing financial strain.

Choice of Funding Company

When considering purchase order financing for your startup, reliability is key. Seek out a funding partner known for their strong reputation, transparent practices, and exceptional customer service. 

Why Kickfurther?

Choosing the right partner for purchase order financing is crucial for the success of this funding strategy. Kickfurther, a trusted, long-term growth partner, offers a unique approach to financing inventory needs, tailored for growing startups. 

What sets us apart?

  • No immediate repayments. Do not pay until your product sells; you control your repayment schedule. Other providers may debit your account daily as part of a repayment schedule. Loans require repayment before your sales cycle has even begun. 
  • Non-dilutive. We don’t take your equity. We do not require equity in your business to access inventory funding.
  • Not a debt. This is not a loan, so it does not put debt on your books which can sometimes further constrain your working capital/access to capital and lower VC valuation.
  • Quick access. You need capital when your supplier payments are due. Kickfurther can fund your entire order(s) each time you need more inventory. 

Kickfurther keeps you in control of your business; say ‘yes’ to opportunities when lightning strikes and stay ahead of demand with fast, flexible funding for up to 100% of your inventory. 

It only takes three steps to get funded at Kickfurther:

  1. Create a free business account.
  2. Complete the online application.
  3. Review a potential deal with one of our account reps & get funded in minutes.

Get a trusted funding partner—join Kickfurther today.

 

Top Ecommerce Inventory Management Strategies for Startups

Posted on by Kaylyn Perry

As an ecommerce startup, you know that effective inventory management is critical for you to succeed long-term. By learning how to effectively manage stock levels, startups like yourself will be able to scale and grow more quickly and effectively. Let’s discuss the crucial role of ecommerce inventory management in your company’s success and uncover key strategies to thrive in the competitive online retail space.  

Why is Ecommerce Inventory Management Important?

Startups often lack historical data to make the accurate forecasts necessary for robust demand planning. Manual and outdated processes are also time-consuming and error-prone. These inefficiencies in inventory management can lead to low productivity, wasted resources, higher costs, and lost opportunities. Ultimately, your customers will go someplace else. 

Businesses that prioritize inventory management are better equipped to meet these challenges. They can avoid stockouts, enhance the customer experience, and make strategic business decisions. With a solid inventory management strategy for ecommerce startups, you can overcome these initial hurdles, achieve your sales targets, and win big.

Core Inventory Management Strategies 

Enhance your business outcomes with these proven ecommerce inventory management strategies: 

Just-in-Time (JIT) Inventory 

Just-In-Time Inventory (JIT) involves receiving inventory “just in time” to fulfill customer orders. By accurately forecasting demand and closely monitoring inventory levels, you can minimize storage costs and the risk of obsolescence. Because just-in-time inventory shortens lead times between order placement and product delivery, your turnover is faster, boosting your cash flow. 

To make this strategy work, you’ll need accurate sales forecasts. Get a good baseline by: 

  • Researching and understanding your market well
  • Using any early sales data you have, even if it’s limited, to spot initial patterns. 
  • Measuring your performance by constantly comparing it with the industry’s and those of similar startups.
  • Consider other factors that can affect demand and supply, like economic conditions, consumer trends, new technologies, and competitors’ moves. 

Dropshipping 

Another effective approach in ecommerce inventory management is dropshipping. This strategy involves partnering with reliable suppliers to have your products shipped directly to customers instead of holding inventory. With zero inventory-associated costs, you can invest more resources into your marketing and sales efforts. 

Dropshipping also allows you to adapt to market changes quickly. Since you don’t have to invest in large quantities upfront, you can test new offerings and add these to your product line. More products means higher sales, which means more revenue that you can reinvest in your startup.  

ABC Analysis 

ABC analysis categorizes inventory into three groups (A, B, and C) based on value and importance. This method helps you prevent stockouts or excess inventory and  increase turnover.

This strategy requires correct product classification. First collect sales data, including quantity sold and sales revenue, for a set period, such as the last 12 months. Then, compute the annual consumption value of every item by multiplying the quantity sold by its unit price. Using these values, you can correctly place each product under one of the following categories: 

  • A Items – Top performers that make up a small percentage of your inventory but contribute most to your revenue (around 20% of your items generating 70-80% of your revenue​​​​). 
  • B Items – Middle performers, around 30% of your items, contributing around 15-20% of your revenue
  • C Items – The largest group, possibly 50% of your inventory, but only contributing around 5-10% to your revenue​

Closely monitor A items for quick restocking. Then, pay less frequent but regular attention to B items. For C items, you can just automate ordering. 

Utilizing Safety Stock 

Unexpected demand spikes or supply chain issues can affect your forecast accuracy. Safety stock, or the extra inventory you maintain at above-average quantities, helps prevent stock outs. To set the correct safety stock level, apply these tips:  

  • Identify highs and lows in demand to predict when you might need extra inventory
  • Calculate your average sales and average lead time (the typical sales during a specific period and the typical time it takes for new stocks to arrive once ordered) 
  • Consider how much your sales and lead times vary. High variability means you need more safety stock to cover sudden spikes or delays.
  • Set your desired service level or how often you want to have enough inventory to meet demand without dipping into your safety stock. If you’re targeting a higher service level,  you’ll need more safety stock. 
  • Apply a basic formula such as:

    Safety Stock = (Max daily sales x Max lead time in days) – (Average daily sales x Average lead time in days).

    This calculation gives you a starting point, which you can adjust based on your risk tolerance and storage capacity.
  • If necessary, increase your safety stock based on seasonality and market trends.

Lowering Storage and Overhead Expenses

Inventory management is all about optimizing your operations. By cutting storage and overhead costs, you can increase your profits and strengthen your cash flow.  This opens up opportunities for further growth investments. 

Here are several inventory management techniques to help you minimize unnecessary expenses: 

  • Adjust your warehouse layout to enhance space use and workflow, reducing time spent on product handling.
  • Leverage inventory management software for ecommerce businesses to automate stock tracking and control 
  • Merge similar products to decrease SKU variety, simplifying management and freeing up storage space.
  • Strengthen supplier relationships for better prices and bulk purchasing benefits, lowering storage costs.
  • Refine the order fulfillment process to minimize labor costs and increase efficiency.

Getting the Right Financing

Adequate funds allow you to maintain optimal inventory levels, adopt the latest technologies, and streamline operations to grow your business. But as an ecommerce startup, you can’t be tied down by how quickly your inventory turns or how soon you get paid. You want to free up your cash flow without the constraints of immediate or inflexible repayment terms or limited financing. What you need is inventory funding, an innovative financing solution that allows you to use your inventory as collateral. Using certain platforms, business users fund your inventory on consignment. However, you have to understand that to secure optimal inventory funding, you need the right partner—this is where Kickfurther comes in. 

Why Kickfurther?

You have a great product and a growing company. But as a CPG entrepreneur, getting the capital you need to achieve that growth can be hard. Let Kickfurther be your trusted funding partner, and get funding for up to 100% of your inventory at competitive rates.

  1. No immediate repayments – Do not pay until your product sells. Other providers may debit your account daily as part of a repayment schedule. Loans require repayment before your sales cycle has even begun. With Kickfurther, you control your repayment schedule.
  2. Non-dilutive – We don’t take your equity. We do not require equity in your business to access inventory funding.
  3. Not a debt – This is not a loan, so it does not put debt on your books, which can sometimes further constrain your working capital/access to capital or lower VC valuation.
  4. Quick access – You need capital when your supplier payments are due. Kickfurther can fund your entire order(s) each time you need more inventory. 

Kickfurther puts you in control of your business. Across the US, CPG (Consumer Packaged Goods) companies who work with Kickfurther eliminate stockouts, keep up with demand, and move into growth mode. Learn more about how Kickfurther can help you achieve your goals—talk to one of our experts today. 

Inventory Financing: A Guide for Retailers Across Industries

Posted on by Kaylyn Perry

Retailers today face numerous challenges that can stretch their resilience to the limit. These include managing cash flow, aligning with consumer preferences, and maintaining adequate inventory levels. All these demand upfront costs that can lock up precious company resources. Sales’ volatile nature and unpredictable economic conditions can complicate financial forecasting further. In such a scenario, inventory financing offers a viable solution that allows inventory-heavy retailers to efficiently manage their stocks without straining their finances.

What is inventory financing?

Inventory financing involves using your current inventory as collateral to access additional funds to invest in more inventory. This way, you can stock your shelves consistently without depleting your cash reserves. As a result, your cash flow is freed up for other vital aspects of your business. 

You might wonder if retail inventory financing is different from wholesale inventory financing. While both serve the purpose of funding inventory purchases, the latter typically caters to wholesalers or distributors buying in bulk to supply retailers. The nuances lie in the scale and the inventory’s final destination, but the basic idea remains the same: leveraging future sales for additional funds today. 

2 categories of inventory financing

This financial arrangement can be broken down into traditional and alternative inventory financing options. Both categories allow businesses to manage stock levels without freezing up operational funds.

Traditional inventory financing

In the traditional model, a retailer applies for a loan, typically at a bank, with the inventory as collateral. This option fits well for businesses with a reliable stock turnover, as they can repay the loan with proceeds from sold inventory. Interest rates and terms are set upfront, which might be challenging during slow sales or when collections are delayed. Key considerations include:

  1. Loan amount – The loan amount is typically around 50% to 80% of the inventory’s  

resale value. 

  1. Interest rates – Banks typically set interest rates upfront. These rates vary but usually range from 3% to 9%. 
  2. Repayment terms – Repayment terms are typically structured, often set over longer periods with fixed installments that businesses need to factor into their budget. 
  3. Eligibility and application process – Banks typically require a good credit score and a solid business history, which might be tough for retail startups and small businesses. Another disadvantage is that the application and approval process is usually lengthy and tedious. This can be a problem if you need quick access to funds. 

Alternative inventory financing

On the other hand, fintechs like Kickfurther and other alternative financing companies offer innovative inventory financing, like credit cards, lines of credit, and inventory funding. This method suits retailers looking for adaptable financing to match inventory turnover or seize unexpected opportunities without being constrained by rigid loan terms and conditions. Before you apply for any alternative inventory financing, do your due diligence and assess these factors: 

  1. Fund amount – Certain types of alternative inventory financing, such as inventory funding, can cover up to 100% of the inventory’s liquidation value. 
  2. Interest rates – Rates for alternative financing companies can range widely from 8% to as much as 99% in extreme cases. However, the cutting-edge inventory funding company Kickfurther offers retail store funding for as low as 1% a month. 
  3. Repayment terms – Repayment terms for alternative inventory financing are more flexible as they can be suited for ongoing capital needs or large, one-off purchases. 
  4. Eligibility and application process – Because it doesn’t emphasize credit scores, it’s easier to obtain even for retailers without traditional loan qualifications. Processing times are also faster, with many fintechs offering quick online applications.

The benefits of inventory financing 

Retail inventory financing offers these compelling advantages that can support your retail business’s growth and stability: 

Enhanced liquidity 

Inventory financing for retailers preserves cash reserves by providing working capital for inventory maintenance and expansion. This is particularly beneficial during peak sales periods when you must stock up to meet increased demand. By leveraging inventory for financing, you can keep your operations running smoothly without cash flow disruptions that can happen with traditional loan models.

Growth and investment opportunities

By releasing capital that would otherwise be stuck in inventory, you can invest in marketing, expansion, and other growth-oriented initiatives. Inventory financing for startups and small retailers is particularly advantageous because it enhances cash flow leverage. With the extra funds, they can seize new market opportunities, expand product lines, and enhance their competitive position.

Improved access to capital

Because the additional funds are backed by the inventory itself, financing companies are enticed to do business with retailers who might not qualify for unsecured loans. This levels the playing field by providing more opportunities for retailers of all sizes and financial positions to access the capital they need. 

Who can benefit from retail inventory financing?

These are just some of the businesses that can fully leverage the strategic power of inventory financing for retailers:

  • Seasonal Retailers like holiday decorations outlets that usually prepare for the high season
  • Fashion Retailers that need to stay current with rapidly changing trends
  • Electronics Shops that want to offer the latest gadgets before their competitors do
  • Specialty stores that regularly secure seasonal or gourmet food items
  • Automotive Parts Retailers who keep a diverse stock for various vehicle models
  • Furniture and Home Decor Outlets that typically invest in large, costly inventory pieces
  • Ecommerce businesses updating their offerings to keep up with the global market

From seasonal shops to ecommerce platforms, inventory financing is a strategic asset for various businesses. But to secure the robust financial support and flexibility to succeed in the competitive retail environment, you need the right inventory financing partner. And that’s where Kickfurther comes in.  

Why Kickfurther?

Kickfurther isn’t your typical inventory financing. With us, you can experience a more growth-focused approach to retail inventory financing. Here are the advantages of partnering with us: 

  • No immediate repayments – Do not pay until your product sells. Other providers may debit your account daily as part of a repayment schedule, and loans require repayment before your sales cycle has even begun. With Kickfurther, you set your repayment schedule based on what works best for your cash flow.
  • Non-dilutive – We do not require equity in your retail business to access inventory funding.
  • Not a debt – This is not a loan, so it does not put debt on your books, which can sometimes further constrain your working capital/access to capital and lower VC valuation.
  • Immediate access to capital – When your payments are due, you need ready capital. Kickfurther can fund your entire order(s) each time you need more inventory.

 

Kickfurther puts you in control of your business while delivering the costliest asset for most brands. By funding your largest expense (inventory), we help you free up existing capital to grow your retail business wherever you need it—product development, advertising, adding headcount, and more.

Don’t let the usual constraints of traditional inventory financing hold you back. Secure the flexible funding you need with Kickfurther with these easy steps:  

  1. Create a free business account.
  2. Complete the online application. 
  3. Review a potential deal with one of our account reps to get funded in minutes.

For streamlined and responsive retail inventory financing that drives growth, join Kickfurther. Get started today and take your business to the next level!

Understanding Inventory Turnover Ratios: A Comprehensive Guide

Posted on by Kaylyn Perry

Without the right tools and knowledge, companies in the consumer packaged goods industry can easily end up with an inventory imbalance. Too little stock means missed sales opportunities, lost economies of scale, and dissatisfied customers. The opposite doesn’t look good, either. Too much triggers cash flow issues, increased holding costs, and stock depreciation. That’s why mastering inventory turnover ratios is critical. Let’s explore how this crucial metric can enhance your inventory management practices and drive your business forward.

What are inventory turnover ratios, and how are they calculated? 

The inventory turnover ratio shows how frequently a company sells and restocks its inventory over a given period, usually a year. Knowing this metric helps you understand your company’s sales and inventory management practices. 

To calculate your inventory turnover ratio, divide your cost of goods sold (COGS) by your average inventory for the same period. 

  • Cost of Goods Sold (COGS) – These are the direct costs of making your product, such as raw materials, packaging, labor, and freight charges. Indirect expenses, like sales, marketing, and administrative costs or interest payments, are not included.
  • Average Inventory – This is your typical inventory value over a specific period. The average inventory considers fluctuations, giving you a steadier baseline to work from.  

Average Inventory= (Beginning Inventory+Ending Inventory)/2

To demonstrate, let’s look at the variables of a supermarket.

Cost of Goods Sold (COGS) for the year: $2,400,000

Beginning Inventory at the start of the year: $300,000

Ending Inventory at the end of the year: $200,000

Inventory Turnover Ratio = COGS/Average Inventory

Inventory Turnover Ratio = $2,400,000 / (($300,000 + $200,000)/2) 

= $2,400,000 / $250,000 = 9.6


This means that the supermarket sold and restocked its inventory approximately 9.6 times over the year.

Limitations of Using Inventory Turnover Ratios for Analysis

While inventory turnover ratios are valuable, they do have a few constraints.   

  • They don’t fully represent your sales efficiency or profitability because they don’t consider your actual sales volume or profit. 
  • You can have different inventory turnover ratios depending on the accounting method you use (i.e., using FIFO, LIFO, or average cost to calculate the COGS). 
  • They overlook external factors, such as market demand, economic conditions, or seasonality, which can greatly impact inventory levels and turnover rates. 
  • They don’t distinguish between high-value or slow-moving items and those that are lower in value but turn over more quickly. This can mask problems in specific segments of your inventory.
  • They provide a snapshot of your business efficiency, not the dynamic story. Let’s say your business is growing or contracting significantly. In either case, your beginning and ending inventories won’t be representative of the entire period. 

 

Despite these restrictions, inventory turnover ratios can give you a crucial health check on your operations, helping you make strategic buying, pricing, and selling decisions. When combined with other data, this metric becomes a vital tool that keeps your cash flow strong and your business profitable. 

Interpreting Inventory Turnover Ratios

So, is a high inventory turnover ratio good? What does a low inventory turnover ratio mean?

A high inventory turnover ratio is usually positive because it indicates that your products are selling quickly. This is particularly important if your items have limited shelf lives or are trend-sensitive. With a fast turnover, you don’t have to worry if your perishable goods will expire or if you need to increase your budget for storage and insurance costs. It also reflects a strong market demand and effective supply chain management​​​​. Yet, it can also mean you’re understocked, which can be a problem.   

Conversely, a low inventory turnover ratio could signify overstocking, poor product selection, or ineffective marketing. These issues are critical because unsold items can quickly become unsellable due to expiration or inventory obsolescence, leading to considerable losses​​​​. But a low turnover ratio may not necessarily be a bad thing. It could be a deliberate result of stockpiling for high-demand periods or buffering against supply chain uncertainties. 

In either case, you must understand the context to interpret your inventory turnover ratio accurately. The ideal turnover ratio typically depends on your specific product category or industry. Products with shorter shelf lives, such as food and beverages, require higher turnover rates to avoid spoilage and waste. Alternatively, non-perishable goods might tolerate slightly lower turnover rates but still demand efficiency to stay relevant to consumer trends and preferences. 

Strategies to Optimize Inventory Turnover 

Maintain a healthy balance between sales and inventory levels with these tips:

1. Restock the smart way

Order in smaller quantities more frequently to avoid overstocking and keep your inventory fresh. This ensures optimal stock levels to consistently satisfy customer demand without locking up too much capital in unsold goods​​​​.

2. Become a preferred customer

When you have a good business relationship with your suppliers, they prioritize you. They’ll want to help you protect your inventory levels, especially when there are stockouts in your industry. Preferred customers are also likely to experience timely deliveries, shorter lead times, and even better terms.  

3. Apply a dynamic pricing strategy

Adjust prices according to market demand, competition, and seasonal trends to stimulate sales for slow-moving items or clear out old stock. This not only boosts sales but also helps maintain a healthy inventory turnover rate​​​​.

4. Leverage technology

Inventory management systems can deliver real-time insights into sales trends, stock levels, and reordering processes. With advanced forecasting methods and automation, you can reduce overstocking and always have your products available. 

5. Get the right financing

Keeping your inventory at the perfect level is tough. No matter how hard you try, predicting every twist and turn in business is a big ask. Overstocking or waiting on unpaid invoices can really pinch your cash flow, blocking you from scaling or growing your business. You need innovative financing that will not restrict you with limited funds, steep interest rates, or inflexible paying options. Enter Kickfurther. 

Why Kickfurther?

With Kickfurther, eliminate stockouts, keep up with demand, and move into growth mode. Here’s what we offer: 

  • No immediate repayments: You don’t pay back until your new inventory order begins selling. You set your repayment schedule based on what works best for your cash flow.
  • Non-dilutive: Kickfurther doesn’t take equity in exchange for funding.
  • Not a debt: Debt financing options can sometimes further constrain your working capital and access to capital—even lower your business’ valuation if you are looking at venture capital or a sale. Kickfurther is not a loan, so it does not put debt on your books. 
  • Quick access: Get the capital you need when your supplier payments are due. Kickfurther can fund your entire order(s) each time you need more inventory.

Kickfurther puts you in control of your business while delivering the costliest asset for most brands. By funding your largest expense (inventory), you can free up existing capital to grow your business wherever you need it—product development, advertising, and expanding your team.

Interested to know how you can secure inventory funding from Kickfurther? Just follow these easy steps: 

  1. Create your free business account.
  2. Complete the online application.
  3. Review a potential deal with one of our account reps to get funded in minutes.

See how much funding your brand can access, and discover how Kickfurther can accelerate your momentum today!