How Retailers Use Funding
When it comes to cash flow, retail can be one of the trickiest industries to be in, which is why retail funding is so common. It takes a lot of upfront cash to purchase inventory with no guarantee on when it will sell. E-commerce and major digital markets like Amazon, Ebay and Etsy have given retailers an opportunity to reach more consumers through the extremely discoverable internet, but online returns only cause more headaches for business owners.
Cash flow for inventory can be strained for a number of reasons: expensive inventory items like cars, large quantities for Christmas rushes, seasonal hires for back-to-school peaks. All of those liquid assets on top of the typical business operating expenses makes for quite the working capital balancing act.
WHY RETAILERS NEED FUNDING
Owning your own business is never without challenges, and that’s especially true when your business is in the crowded retail industry. In such a competitive market where the challenge of reaching customers only increases with every digital advancement, smart business owners know the importance of staying ahead of the curve, and they achieve that advantage with a boost in working capital. An influx of funds helps the owners of both e-commerce and brick and mortar retail stores prepare for seasonal peaks, stay up to date with current industry trends, and reach customers before their competitors do with smart marketing. Because let’s be honest, if you can’t give consumers what they want, somebody else will.
Common Uses Of Retail Funding:
Common Challenges Facing The Industry
Ecommerce has drastically changed the retail landscape. To stay competitive, businesses need an online store with convenient return policies and shipping costs, as well as a social media presence that builds a relationship with customers and engages them with their brand rather than throwing out products in an old school marketing style. Each generation has its own preferred way to be marketed to, creating an even bigger challenge for companies looking to appeal to a broader age demographic.
How To Prepare To Receive Retail Funding
You will definitely need strong year round cash flow to show that your business is healthy. Other factors funders will look at are frequency of deposits. If your retail business has slow months, as an option for expanding your business model you could open an online store, diversify your services, rent out assets, or another creative way to keep some cash flow going.
Another word of advice is to apply when strong not struggling. If you open up a line of credit when your business is healthy it will be easy to get approved, rather than applying at a low when your cash flow looks like it poses a risk.
For more on industry funding, read our other post on restaurant funding.
Category: Finding Funding