No one likes to be in debt. However, when you are in business, it is sometimes necessary to get a loan. Many types of loans are available to small and medium-sized business owners. The type you choose will depend on your situation.
Lenders for business inventory loans use your existing products as collateral in case you are not able to pay back the loan right away. In most cases, inventory loans have higher interest rates than regular business loans. Here are some situations when business inventory loans are a good idea.
1. Seasonal Items
If you are in retail or wholesale, you need to buy much more seasonal products than you can afford to take advantage of the peak in sales. Good examples of these are holiday-themed products, such as Valentine pillows or Christmas decorations.
You could estimate how many of the products you can actually move by checking how much you sold the last time. A small loan can give you just enough capital to make a large profit, and you can pay it back quickly.
2. Brisk Business
Sometimes you hit the jackpot with a product that just flies off the shelves. It could be a hot trend. It could also be a time of the year when people buy big-ticket items, such as cars. You will want to strike while the iron is hot and make sure you have enough in stock to meet demand.
3. Temporary Cash Needs
Some small and medium-sized businesses accept payment terms that can span several months. Sometimes they will experience a temporary cash shortage while waiting for the money to come in.
A short-term inventory loan can help them bridge the gap without much trouble, especially if they know exactly how much is coming in, and when.
Business inventory loans are a good idea when you need a little capital to buy more goods that are selling well or if you experience a temporary cash shortage. They are short-term loans that can spell the difference between a good and bad year for small and medium-sized businesses.