An important part of running your business is making sure that your products are always in stock. However, you may find that you need additional funds to do this. If you don’t have these funds at your convenience, you might want to consider taking out a loan. This could keep inventory moving smoothly on and off your shelves and keep your customers happy as well. Two types of loans that are particularly good for inventory management are inventory loans and purchase order financing.
Inventory loans are short-term loans specifically for small businesses purchasing inventory. They’re especially ideal for seasonal businesses. This type of loan was designed for companies with strong sales records. Occasionally, your credit rating is sometimes taken into consideration as well. These loans are usually given out within a few days so that you can have inventory on your shelves as soon as possible.
An inventory loan might be a good option for your business if you haven’t been able to get traditional loans because of insufficient collateral or bad credit. It may also help your inventory management if your business always needs vast amounts of inventory on hand or if you have one season that is particularly busy.
Purchase Order Financing
This type of loan also keeps you supplied with inventory but the method differs from inventory loans. With purchase order financing, your credit score isn’t taken into account. Instead, it’s your customer’s rating that is evaluated. Once the lender approves your customer’s credit rating, they pay the manufacturer of your inventory and sometimes shipping fees as well. There may be fees that your company has to cover, such as the insurance. This part of the process can take up to two weeks.
One key difference with this type of inventory management is that the inventory you just ordered doesn’t get delivered to your store. Instead, it goes directly to the customer who purchased it. You may find purchase order financing ideal if you don’t manufacture your own goods but are instead a distributor.
Regardless of which type of loan you decide to use, there are a few practices you can use to increase your chances of getting one. Make sure you’re storing your inventory properly. You don’t want to waste your goods because you haven’t taken the proper steps toward storing them in the best possible environment. Also, ensure that you’re not storing more than you need. You typically only need enough inventory for a few months at a time.
Inventory management shouldn’t be the hardest part of your job. Consider either an inventory loan or purchase order financing so that your customers can always find what they need on your shelves.