If you’re an e-commerce seller, then you know that inventory financing can be a great way to get the money you need to grow your business. However, even with all the money in the world for inventory, ecommerce businesses can still fail. The risk of failure is higher when ecommerce inventory management is inefficient. We’re here to discuss two things: ecommerce inventory management and ecommerce inventory financing.
Keep reading to learn how to fund and manage ecommerce inventory.
What is inventory financing for ecommerce?
Inventory financing is a form of financing provided to ecommerce businesses to help them cover the costs associated with maintaining and buying inventory for their online stores.
This can be especially important for small or young businesses that need to build up their stock levels in order to grow and meet consumer demand. Inventory financing may come from a variety of sources, including banks and credit unions, crowdfunding sites, or specialized financial institutions.
Many businesses also take advantage of factoring services that allow them to sell their invoices to investors at a discount in exchange for upfront cash. Overall, inventory financing can be an invaluable resource for ecommerce businesses looking to accelerate growth and expand their operations.
How ecommerce inventory financing works
This type of financing operates in much the same way as traditional business lending, with funds being provided in one lump sum and then repaid over time with interest. In some cases, the lender will pay suppliers directly for inventory. Inventory can be used as collateral. If you need funding for inventory along with other business expenses, you may want to take out a traditional business loan rather than inventory financing specifically.
The downside to inventory financing through traditional lenders is that it can be hard to qualify for, extremely time consuming, and expensive. Financial institutions may not be able to offer much flexibility for business owners. For these reasons and more, a growing number of ecommerce sellers are using inventory funding instead.
Inventory funding allows backers to choose businesses that they wish to invest in. To connect with backers, ecommerce businesses will need to use platforms such as Kickfurther. We will cover more on this option a little later on.
Why e-commerce sellers benefit from inventory financing
E-commerce has revolutionized the way businesses sell products and services. By tapping into a global market, e-commerce sellers can reach a much wider audience than brick-and-mortar businesses. However, selling online also comes with its own set of challenges.
One of the biggest challenges is having enough inventory to meet customer demand. This is where inventory financing comes in. Inventory financing is a type of funding that allows businesses to purchase inventory upfront, before they have sold it. This gives businesses the capital they need to grow their inventory and meet customer demand. In addition, inventory financing can help businesses take advantage of bulk discounts and seasonal sales.
As a result, inventory financing can be a valuable tool for e-commerce sellers who want to grow their business.
Inventory financing options for ecommerce sellers
Are you curious about how to manage ecommerce inventory? When running an ecommerce business, at some point you may need to consider financing options for your inventory. There are a variety of different financing options that can help you to cover the costs of purchasing new products. Each of these financing options has its own advantages and drawbacks, so it is important to carefully consider which option is right for your business.
Inventory Financing: Inventory financing allows sellers to get the capital they need upfront to purchase products without having to wait for sales to generate revenue. Inventory financing is typically secured through banks and credit unions. For well-established businesses, the cost and strict requirements that come along with inventory financing may be fine. But for smaller businesses, especially with volatile sales, they may need more affordable funding and more flexibility.
Inventory Funding: Similar to inventory financing, inventory funding can get you the inventory you need without depleting cash flow. The difference is that inventory funding is provided by a community or single backer. The benefit? More flexibility and cheaper costs. For inventory funding, you can visit Kickfurther to access a community of backers that want to work with you.
Invoice Factoring: For ecommerce sellers, inventory factoring can be a helpful way to free up working capital that is tied up in inventory. One of the biggest advantages of inventory factoring is that it can provide a source of funding that is not dependent on creditworthiness. This can be especially helpful for new businesses or businesses with poor credit histories. However, it can be expensive. The fees associated with inventory factoring can add up, and they may not be worth it if the business is not doing well.
Merchant Cash Advance: With a merchant cash advance, you can get the funds you need without having to put up collateral or go through a lengthy application process. The funding is based on your future sales, so there’s no need to worry about making monthly payments. You can use the funding for anything you need, including inventory, marketing, or expansion.
MCAs typically have much higher interest rates than traditional loans, meaning that businesses will end up paying back significantly more than they borrowed. Providers often require businesses to give up a percentage of their future sales, which can put a strain on cash flow in the long run. Also, MCAs are typically Short-term funding solutions, which means that businesses will eventually need to find another source of financing.
Loans using a bank or credit union: There are certainly advantages to this approach, including the fact that these types of financial institutions generally offer competitive interest rates and have extensive experience dealing with large sums of money. However, getting a loan can also come with certain drawbacks, such as vague terms and conditions that make it difficult to definitively predict what we will have to pay back in the long run.
Which financing option is best for your ecommerce business?
When it comes to ecommerce businesses, there are a few different financing options to choose from. The best option for your business will depend on a number of factors, including the size of your business, your total revenue, and your growth potential.
Inventory financing is generally the best choice for ecommerce businesses. Here’s why.
First of all, inventory financing allows you to avoid putting up personal collateral. If you use a traditional bank loan to finance your inventory, you’ll likely have to put up your home or another asset as collateral. You can avoid this risk with inventory financing by using your inventory itself as collateral.
Secondly, inventory financing gives you the flexibility to finance only the amount of inventory that you need at any given time. This is especially helpful for businesses that experience seasonal fluctuations in demand. With traditional loans, you would have to borrow a set amount of money and then hope that you don’t end up with too much or too little inventory. With inventory financing, you can adjust the amount that you borrow based on your current needs.
Finally, inventory financing can help you free up working capital that would otherwise be tied up in your stock.
Tips to qualify for ecommerce inventory financing
There are a number of strategies that you can use to qualify for ecommerce inventory financing. For starters, it is important to show that your business has strong revenue and profitability. This can be demonstrated by having multiple years of data available, as well as projections for the future.
Additionally, you should be prepared to provide detailed information on your inventory and sales history, including a regular turnover rate and evidence of customers who come back regularly. Another important factor to consider is the strength of your ecommerce inventory management team and the logistical infrastructure of your business. By giving lenders confidence in your operational capabilities, you can greatly improve your chances of getting approved for financing.
Do alternative financing options exist for inventory ecommerce needs?
Acquiring and maintaining a healthy inventory can be a challenge, especially for small businesses with limited capital. Traditional financing options such as loans and lines of credit may not be available or may not be feasible given the relatively high costs of inventory and strict qualification requirements.
Fortunately, there are a few alternative financing options that can help ecommerce businesses stay stocked and operational. These include merchant cash advances, invoice financing, and, of course, inventory funding options.
How Kickfurther can help
If you’re struggling to find ways to finance your next round of inventory, Kickfurther might be able to help. With Kickfurther, you can fund millions of dollars of inventory in less than an hour. It’s an easy funding solution that will grow with you – not against you – at costs that are up to 30% lower than what you’ll find with other inventory financing options.
Plus, you don’t have to pay a thing until you sell – perfect for businesses that are just starting to get a footing in the ecommerce world. If you’re interested in getting funded on Kickfurther, start by creating a free business account. Once you complete the online application you can review deals with potential account reps.
Inventory financing is a great option for ecommerce businesses that are expanding their product offerings.
By using inventory financing, you can get the cash you need to buy new products and increase your stock without taking out a loan or using your personal credit. These tips should help you find the right inventory financing partner and secure the funding you need to grow your business. Brands that sell physical products or non-perishable consumables with revenue between $150k to $50MM over the last 12 months can qualify for inventory funding through Kickfurther.