When it comes to financing inventory, retail businesses can be creative using loans, credit cards, supplier terms, and even advances from family. Whatever the method, raising the money can be a challenge.
“Every business has to fund inventory before it has a chance to generate revenue from sales, and there isn’t a single one [funding] Solution for all businesses, ”said Sean De Clercq, CEO of Kickfurther, a platform that connects investors with emerging brands.
Kickfurther refers to these connections as co-ops and distinguishes itself from other financing or crowdfunding options. Before describing these cooperatives, it’s worth noting how retailers, direct selling brands, and even consumer goods companies acquire inventory.
Aside from savings, bank loans, credit cards, and personal investors, companies have alternatives to inventory financing.
For example, very small businesses based in the United States can apply to Kiva for interest-free loans of up to $ 15,000 and payment can take up to three years.
Indosole, a brand that sells shoes made from recycled tires, is one of many companies Kiva has used for funding. Kiva works with institutions to provide interest-free loans to small businesses. Kiva and its partners also provide non-financial support and resources to help businesses thrive.
While nonprofit lenders like Kiva are rare, they do exist. The Accion Opportunity Fund is another example of affordable funding.
As a retailer grows and their inventory increases, other forms of financing become available through services such as Kabbage, BlueVine, Clearco, OnDeck, or the like. These companies offer various forms of term loans and lines of credit that incumbents can access. In most cases, lenders in this category rate a business based on credit history, historical and projected revenue and cash flow.
Another alternative for some businesses is crowdfunding. Crowdfunding platforms are, in a way, the Airbnb or Uber of retail or direct-to-consumer inventory.
Airbnb, for example, doesn’t own any rental properties; It just connects people who do that with others who want a short term rental. And Uber doesn’t necessarily own cars. Rather, it connects people who do it with others who want a ride.
Similarly, crowdfunding platforms connect businesses with funders.
For example, electric bike maker Reevo has raised millions on Indiegogo, effectively selling pre-orders to customers who, in some cases, will wait a year or more to receive the bike.
Perhaps the least discussed option for financing inventory is consignment, or even crowdfunding consignment.
“We’re specific to companies with physical products, which gives us the ability to look at things like production and distribution risks. As we are very specific to this niche, we can also finance our businesses for less money, ”said De Clercq of Kickfurther during a live interview with the CommerceCo by Practical Ecommerce community on July 15, 2021.
Kickfurther reviews companies before allowing them to showcase their cooperatives on the platform. Once approved, funding usually comes quickly. Kickfurther investors can support entrepreneurs and generate a return with delivery options. Partial investments start at just $ 20.
Recently funded cooperatives at the time of writing included beverage maker Greater Than and clothing brand House of Fluff.
Inventory shipment is not new. Look at the Winmark Corporation. The company owns several nationwide second-hand retail brands including Play It Again Sports, Plato’s Closet, and Once Upon a Child. Each of them draw inventory from retail shipments: individuals drop off used goods, and the stores pay these individuals when the product is sold.
Kickweiter applies this idea to e-commerce companies.
Advantage for investors
In the technical sense: “As investors we take ownership” [inventory] and hand it over to the company to sell on our behalf and if they sell it the underlying cash will be distributed, ”said Michael Fox-Rabinovitz, managing partner of Chartwell Capital and author of“ Own a Fraction, Earn a Fortune. ”Fox-Rabinowitz invests through Kickfurther and also joined the CommerceCo community during the live interview.
“We take a realistic look at the deal. If we like it, we’ll assign him cash … it’s really a fraction of the ownership in some ways, ”said Fox-Rabinovitz.
But at least some investors don’t necessarily think that way about the Kickfurther partnerships.
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