How Inventory Finance Can Boost Your Seasonal Business

Whether you operate a work truck dealership, a grocery store or a specialty retail operation, chances are high that you spend a fair amount of time – and stress – working to manage seasonal cash flow and inventory.

The good news is that strategic use of financing programs can help you boost your seasonal business. Specifically, inventory finance can improve cash flow, inventory position and customer satisfaction.

Inventory financing is a form of asset-based lending in which the amount you borrow is determined by the value of your inventory. Sometimes called an inventory loan, inventory financing takes the form of a short-term loan or line of credit, which lets you purchase products (inventory) to sell at a later date. The inventory serves as the collateral for the loan.

6 ways to accelerate seasonal business

Here are six key ways that strategic use of inventory financing can boost seasonal business.

• Anticipate peak-sale periods. Businesses can use inventory financing funds to purchase inventory in advance of seasonal needs. Additional cash availability may enable volume discounts, and the ability to achieve a well-stocked lets you capitalize on sales opportunities when they occur.

• Increase cash flow. During busy seasons, an infusion of cash can help a business manage day-to-day expenses and operations more smoothly.

• Provide gap funding. Inventory finance programs can be huge helps to companies that experience sizable gaps in cash outlays and receipts, as they can use the funds to pay suppliers before selling the products. For example, transportation dealers often must purchase vehicles or equipment, but won’t receive payment until that inventory is sold. They could use inventory financing – commonly called floorplan financing in the vehicle dealership sector – to prepare for the annual roll-out of new models, or the seasonal needs of farming and ranching in the agriculture industry. An asset-based lender can use the inventory as collateral to bridge that gap between purchase and eventual payment of equipment.

• Avoid stockouts. Being prepared assures you can maintain the supply of products you need when you need it. As a result, you can avoid out-of-stock positions and increase customer satisfaction while maximizing sales.

• Respond to market shifts.
  Customer needs and wants ebb and flow. Supply chains are constantly changing. Interest rates fluctuate. Inventory financing can help you stay agile and respond quickly to market demands. In the transportation industry, for example, a dealer might be able to prepare for increased demand for electric vehicles upon the announcement of a tax credit. In the fashion industry, a retailer could utilize inventory financing to stock a new trend.

• Provide customer financing. Along with purchasing their own inventory, companies in some industries must help their customers finance their purchases. And just as distributors and dealers work with their own seasonal needs, so do customers. By avoiding tying up working capital, businesses can use inventory financing strategically to help in the development of customer financing programs. They may also be able to create custom payment terms based on seasonal demands and cycles.

Customized inventory finance programs

While inventory financing is sometimes considered “commodity financing,” the truth is that is occupies a strategic place in most business plans, and particularly so for businesses that deal with seasonal demands. With an in-depth understanding of your business model, a lender can develop a customized financing program that incorporates inventory financing.

Working with the right financing partner can ease the ebbs and flows of seasonal business while driving growth and, ultimately, improving the bottom line. When you are ready to discuss inventory financing’s place in your plans, let us know. Here at Mitsubishi HC Capital America, we are dedicated to providing customized solutions to help business create long-term sustainable growth, successfully navigating seasonal ups and downs. One of our experts in your industry can discuss financial options – including inventory finance – with you to identify how to best meet your needs.