how to use working capital loans for your wholesale business
In the business world there are often many times when you are short of funds. That is however not an excuse to close the deals that you have been working towards. Being short of funds is a challenge that you can be able to rise above and continue with running your wholesale business. You should look into ways that can enable you to turn around your financial fortunes. Having access to credit is one way to go about it. Being able to use credit in the right manner and at the right time is the best thing to know. This can come in handy, especially when you face similar situations in the future. Here are some more tips to take note of about working loan capital usage.
Using the Working Capital Loan
Keeping the Right Inventory
Inventory is a dilemma for most people that run wholesale businesses. By having too much of your inventory lying in your stores, you are holding up the working capital that can be used for other tasks that are needed. On the other hand, by having less inventory you are making it hard for the customers that need goods since you delay delivery, losing precious time. You need to spend more money on the inventory. The most important thing is ensuring that the inventory is neither too much nor too little. You are going to lose a lot if you cannot keep the right inventory. One way to turn your inventory into sales is to observe trends. Watch what consumers are buying the most and provide it.
A working capital loan can help you recover the money you lost from not selling the entire inventory. A smart move is to use the money to come up with accurate ways of predicting future inventory needs. Every problem has a solution, you only need to look in the right places to find it. The issue of not being able to keep track of the required inventory in the wholesale business can be fixed if you don’t do something about it. By embracing technology, you can use the right tools to ensure that you have the right inventory quantities. The business software that you choose has to show a clear picture of the demand so that you can order the right amount of inventory. This will reduce wastage of time and resources and guarantee accurate forecasting, hence making good use of the working capital loan.
Accounts Receivable Factoring
In the wholesale business, you have certain clients that take items on credit and pay later. Since you can never be too sure if the creditor can pay you back on time, you have to do some accounts receivable factoring. A working loan can ensure that you do not have a cash crunch when waiting for your invoices to get paid. In this case, the lender usually purchases the unpaid invoices at a discount and then pays you. This is a method that is efficient, especially when you rely on the invoices, and you are not yet heavily capitalized.
You can decide to change the rules if you have some more money on your side. The working capital loan allows you to do exactly that. While many vendors can require you to pay upfront, you can negotiate for a 30 or 45 day payment interval. This technique reduces the pressure on your finances and enhances the cash flow. You can use the money for something else.
A working capital loan is a tool that can be able to make many wholesale businesses perform way better. You can be able to do more with the little you have by using the right tools and techniques. You can use the methods mentioned above for maximum efficiency.