4 Reasons Why Using a Business Loan to Purchase Inventory is a Smart Move

Small Business Loans - 2 Min Read

As a small or mid-sized business owner, you’re no doubt familiar with the phrase “you have to spend money to make money.” In fact, you’ve probably said it dozens (maybe hundreds?) of times to colleagues, partners, friends, family members – heck, even the stranger sitting next to you on a flight.

And one of the best ways to reap the rewards of this wise, time-tested advice is by using a business loan to purchase inventory. Here are the 4 key reasons why:

1. Customers HATE “Sold Out” Signs

If you’re a retailer – whether online, brick and mortar, or both – then having fully stocked inventory is a must! Nothing infuriates would-be customers more than seeing a “sold out” sign. It’s not just the fastest way to lose a customer, but it’s the fastest way to send one straight to the competition.

2. Get Ahead of Promotional Campaigns

Running targeted promotional campaign can be highly profitable – but only if you have enough stock to handle the surge in demand. Otherwise, instead of adding to your customer base, you may actually do the opposite. You don’t want to create an army of “anti-brand ambassadors” who’ll criticize and condemn your business on social media, around the water cooler at work, over the proverbial backyard fence…and so on. Even worse, people may actually think that your promotional campaign was a scam to begin with, which will just make them angrier — and more motivated to say and write negative things about your business.

3. Enjoy Preferred Pricing

As you know, one of the simplest ways to boost your business’s profitability is to lower input costs. A business loan allows you to make a larger-than-normal purchase from your supplier(s) – which gives you leverage to negotiate preferred pricing. It can also open the door to other perks, including more favorable payment terms (e.g. net 60 or 90 days instead of COD or net 30 days), and it may give you access to preferred pricing for other inventory items.

4. Improved Cash Flow Management

If you have large warehouses or storage facilities, using a business loan to purchase inventory can be a shrewd cash flow management move since it will prevent you from having to draw down on your line of credit (LOC) later in the year when sales may be at their seasonal lows. Remember: drawing down or utilizing all of your LOC lowers your credit score, which makes your cost of borrowing higher. It also eliminates what is probably your best source of “emergency funds”, which puts your business in a vulnerable position – since if you’re desperate for cash to take care of an emergency expense, you’ll certainly pay a premium.

Applying for a Business Loan

At Mulligan Funding, we make it simple and straightforward to apply for a working capital loan.

Call Mulligan Funding at 855-326-3564 to discuss your financing options today!

The information shared is intended to be used for informational purposes only and you should independently research and verify.

Note: Prior to January 23, 2020, Mulligan Funding operated solely as a direct lender, originating all of its own loans and Merchant Cash Advance contracts. From that date onwards, the majority of funding offered by Mulligan Funding will be by Loans originated by FinWise Bank, a Utah-chartered Bank, pursuant to a Loan Program conducted jointly by Mulligan Funding and FinWise Bank.