In order to keep your business running, you also need to keep the shelves stocked. But procuring salable goods isn’t always easy. How you purchase them impacts your returns and determines your profit. Thus, keeping your inventory full requires some careful, wise planning to ensure it earns the gains it’s due.
You might think you can only refill your stocks via your own business pool. That’s not always the case. Many times, taking out financing to refill inventory can be highly profitable for business.
You can use inventory financing as a business tactic. Under the right circumstances and appropriate loan terms, you will be able to save up on your inventory acquisition cost.
The trick is in the terms
You must look at a loan term that jives with how quickly your inventory will turn. If you are expecting your inventory to last for five months, it would not make sense to get a loan with a loan term that lasts longer. You wouldn’t want to pay for inventory that you no longer have. It would also limit you from taking out another loan in case you need to.
In considering the loan term, you should also look into the overall amount of the loan. Although getting a longer loan term will give you lower interest rates and thus lower monthly payments, it would also be more costly in the long run. And if you choose a shorter loan term, will it not eat all the returns you get from the merchandise?
A flexible option
If you don’t want to get a loan in bulk, you can opt for a business line of credit which allows you to withdraw funds whenever you need them. It is much more flexible and you are only charged interest on the amount of money you borrow from your available credit.
Restocking inventory may initially seem simple but could actually come as a complicated question of cost. If you’re wise on the use of your money, it is only sensible to labor over this aspect of business.
If you’re looking for the right people who can provide reliable guidance, talk to us and we will take you through the process.