About inventory financing
Each business has different needs when it comes to inventory, as their product, goals, and budget are unique. Finding the right inventory financing solution for your business depends on your budget, sales forecast, and growth goals.
Before choosing a funding solution, you’ll need to consider your various costs including raw materials, manufacturing, packaging, shipping, storage, and order fulfillment fees. If you’re trying to save on inventory costs, it’s a good idea to shop around and search for suppliers that will give you the best deal. Buying in bulk or signing a long-term contract may help your budget.
However, many eCommerce sellers still struggle to pay their extensive supply chain costs. Inventory financing will provide you the freedom to make strategic choices, so you don’t have to worry about going out of stock.
Inventory financing opportunities
There are an overwhelming amount of funding options out there. There are a lot of variables to consider when choosing an inventory financing partner, so it’s a good idea to take your time when deciding. Funding can make or break a business, so choosing the right loan type will be essential. When looking over the options, consider your current business needs, your priorities, and your future goals. Make sure the financing plan you choose aligns with your unique business’s needs.
Bank loan
A bank loan is a lump sum of money that you get from a bank. You have to repay such a loan through fixed monthly payments, along with interest. This loan type often comes with a high limit, which is useful for those who are expanding their operations. Banks usually require that you have a three year trading history and a high credit score before applying. They don’t often work with startups, so if that sounds like you, it’s best to look elsewhere. However, if you do qualify, you’ll get to enjoy a low interest rate. Collateral may or may not be required in order to secure this loan.
Pros
- High loan limit
- Low interest rates
- Interest rates are tax deductible
Cons
- Strict eligibility requirements
- Lengthy application process
- Collateral may be needed
When applying for a bank loan, make sure you meet their requirements before putting in all that time and effort. They check your credit, which can reduce your score. If you apply at several places, you may find that your score has decreased exponentially. Ask yourself if you’re willing to use your assets as collateral, if they can offer the amount you need, and if the fixed payments are doable for you before making a final decision.
Revolving line of credit
A revolving line of credit may be supplied by a bank or lender. It’s an easy way to access money when you need it, as it’s similar to a credit card. The more you pay on the loan, the more funds you have access to. It’s the type of funding that will help you during emergencies or simply manage your day-to-day expenses. Your limit will be determined by your business history and the finance institution you’re working with. However, they’re usually on the lower side.
Pros
- Easy access
- Builds business credit
- Freedom to use on any business expense
Cons
- Higher interest compared to other loan types
- Low borrowing limits
- Extra fees may be a part of the contract
As long as you have the capital to meet the fixed monthly payments, then this option may be beneficial for your business. You can use the cash for any business expenses that you choose, and when you choose. Keep in mind that this isn’t for those who are looking to make large purchases or planning to expand because the loan limit is usually on the smaller side.
Crowdfunding
If you don’t qualify for regular loans, you can turn to crowdfunding to finance your business. Crowdfunding involves getting a number of small investments from numerous investors. You pitch your project to potential supporters, often through dedicated crowdfunding platforms, and If they like what they see, they’ll give you an amount of money of their choice. You won’t need to go through credit checks or business history evaluations, but your campaign needs to be creative and eye-catching if you want to succeed.
Pros
- Quick access to cash
- Keep complete control over the project
- Great alternative for those who don’t qualify with banks and lenders
Cons
- Many crowdfunding campaigns fail to reach their goals
- Idea theft can happen
- Building a campaign takes time and effort
You’ll need to put together a high quality pitch or campaign to sell your idea to potential investors. This works best if you have a new, innovative idea. However, many crowdfunding campaigns fail to meet their goals, so funding isn’t guaranteed.
Equity financing
Equity financing is when you trade shares in your business for funding. The most common types of equity investors are angel investors and venture capitalists. These firms and individuals give large sums of capital to businesses they feel are promising, expecting to profit along with the company in the future. In order to secure equity financing, you’ll need to pitch your business idea to numerous angel investors or venture capitalists in your field. If they choose to invest in your project, you’ll give them equity in your business.
Pros
- No repayment needed
- Fast access to large amounts of capital
- Receive expert advice and guidance from investors
Cons
- Diluted ownership
- Profits must be dispersed amongst the shareholders
- Profit share owed to investors may cost more than the interest on a regular loan
Be careful who you sell your shares to, as these people are now your business partners. They own a portion of your company, therefore, they have sway in company decisions. However, if you find experienced investors, they can benefit your business greatly with their knowledge and insights. This type of financing is particularly helpful for startups.
Inventory financing
Inventory financing is unique in that it can only be used for your inventory costs. It’s easier to obtain than other types of loans because the inventory that you’re purchasing will be used as collateral. The lender will perform routine evaluations on your inventory, since it’s a big part of their investment. You can use these funds to make sure you stay in stock, prepare for product launches, and even purchase backup stock for those surprise sale spikes.
Pros
- Quick and easy process
- Inventory is your only collateral
- No credit check required, equity-free
Cons
- Can only use the funds for inventory
- Regular lender evaluations
- Higher interest rates than other types of financing
Inventory financing can help new businesses build up their stock of inventory and give active businesses the means to manage their inventory. If you can afford the repayments and don’t mind the high interest rates, then this is a viable option.
Revenue-based financing
If your business is consistently bringing in revenue, revenue-based financing might be a good choice for you. Funders provide you with the funds you need, and you repay them with a percentage of your future sales revenue. This is ideal for businesses with fluctuating sales, as they often find it hard to make high monthly payments during slow sales months. You won’t need to give up ownership in your company, either.
Pros
- Maintain 100% ownership of your business
- Quick access to funds
- No credit checks needed, equity-free
- Repayment is a percentage of monthly revenue
Cons
- Requires consistent revenue to qualify
- Cost of capital is often higher than interest on a regular loan
- Not a practical option for all business types
One of the main downsides to revenue-based financing is that the cost of this type of funding is often higher than that of traditional loans. However, the flexibility is still attractive to many businesses, and you may be eligible for revenue-based financing even if you don’t qualify for a bank loan or line of credit.
Merchant cash advance
For businesses in need of quick cash, a merchant cash advance is worth considering. As long as you have been in business for several months and bring in revenue from credit and debit card sales, you’re likely to qualify. It’s easy to obtain and most lenders don’t consider your credit score during the approval process.
Pros
- Quick access to funds
- Flexible repayment schedule
- No collateral required
- Lenient eligibility requirements
Cons
- Higher cost of capital than other types of funding
- Does not help you build credit history
- Money can be removed from your account, regardless of sales volume
It’s important to pay attention to the costs involved with a merchant cash advance, as they are usually more expensive than traditional loans and funding methods. It won’t help you build credit history, either. However, if you struggle to meet the fixed monthly payments required with other types of financing, a merchant cash advance might be a good solution.
8fig: An alternative to inventory financing
Inventory financing can be hard to obtain, especially for new businesses. Banks and other lenders have strict eligibility requirements, leaving promising businesses without funding to grow. Plus, it takes more than capital to grow your business. That’s why 8fig provides you with a full suite of growth tools in addition to flexible, continuous financing.
Why use 8fig for inventory financing
8fig funds up to 90% of your supply chain costs, including inventory. You’ll have the freedom to use the funds for everything from manufacturing to freight to marketing. 8fig’s continuous funding is designed to optimize your cash flow, ensuring that you have cash on hand when you need it. You’ll also have the flexibility to make changes to your plan in real time, allowing you to adapt to unexpected changes and emergencies. Never worry about going out of stock again with a Growth Plan from 8fig.
How 8fig works
1. Apply
The application process is fast and easy. Answer some questions about your business and sales, and then provide basic information about your supply chain stages and expenses.
2. Connect your store and bank account
In order to provide you with an optimized Growth Plan, 8fig requires that you connect your store and bank account to the 8fig platform.
3. Get funded
With 8fig, you can get funded in just days. Since 8fig funding is continuous, you receive capital infusions into your business right when you need it.
4. Make adjustments
If something changes and you need to adjust your payments, remittance schedules, or even funding amount, you can always do so thanks to 8fig’s flexibility.
5. Grow your business
All that’s left to do is sell, sell, sell. With 8fig, businesses are able to scale 4X as fast.
For 8fig offers in addition to financing
In addition to financing that you can use to fund your inventory, 8fig supplies you with the tools you need to grow. If you want to increase cash flow, improve your operations, and forecast sales, then you’re in good hands. New businesses and mature ones alike can rely on the platform’s tools to help manage their businesses, so you can branch out and grow.
You can use all these tools on one growth platform. Supply chain mapping and cash flow management are inseparable parts of 8fig’s offering. Our one-of-a-kind growth platform will help you achieve long-term growth and success.
Who is eligible for 8fig inventory financing
If you sell a product online, have a trading history of at least one year, make an annual revenue of over $100,000, and have made an average of $8,000 per month for the last three months, you’re likely eligible for financing from 8fig. The application process is quick and simple. You can be approved and have access to funds in days, rather than weeks or months.
How to apply for 8fig financing
It’s easy to apply for 8fig financing, and it only takes a few minutes. Simply answer the questions and follow the prompts and you’ll get funded in no time!