Is This A Good Time To Borrow Money And Expand My Closeout Business?
It costs money to run a business. Funding your business is one of the first — and most important — financial choices most business owners make. How you choose to fund your business could affect how you structure and run your business. According to the SBA, every business has different needs, and no financial solution is one-size-fits-all. Your personal financial situation and vision for your business will shape the financial future of your business. If your company buys obsolete inventory and closeouts, it is essential you have enough liquidity buy liquidation stock. If a business is shutting down it’s 3PL warehouse and wants to liquidate quickly, you must have ample cash on hand. Closeouts move quickly and if you cannot pay fast you won’t get the best deals. There are other excess inventory liquidators and companies buying overstock that are very well funded; if you cannot compete you will be out of business.
Small business owners face many challenges when they apply for loans, but sometimes, the biggest challenge is of their own making. If you wait until you urgently need financing and are at risk of shutting down your 3PL warehouse to start looking for a lender, you’ve waited too long. The best time to borrow money is before you need it, and there’s a grain of truth to that. You can create cash flow buy selling obsolete inventory, closeouts and surplus merchandise. If this doesn’t work, the best time to borrow is when you have a strategic plan for the money and aren’t in critical need. Taking a thoughtful approach to seeking financing can make the loan process less stressful, enhance your chances of success, and ensure that you can pay back the loan with ease. Businesses that specialize in buying overstock and liquidating old inventory must have a large cash reserve on hand to take advantage of buying opportunities. When a business has liquidation stock for sale, it needs a surplus liquidator who they can count on to act fast.
In today’s economy, lenders are becoming more cautious and putting more weight on a business owner’s cash flow, time in business and credit history. Cash flow can be improved by having a liquidation process to sell overstock inventory and get rid of slow moving products before they become a problem. If you need a company that specializes in buying overstock a simple Google search will result in liquidation buyers for excess inventory sales. If you still decide to proceed with a loan, advance planning gives you time to honestly assess your financial circumstances to determine if your business is likely to qualify for the loan you seek. The bank will likely ask for your current inventory situation, and it would be helpful for you to show them any effort you made to sell old inventory and obsolete inventory.
Some of the most common examples of when businesses borrow money would be when you need to expand operations, purchase new equipment, or upgrade your physical location. Other times it’s to replenish your inventory, hire talent, or increase working capital. Or, maybe you want to explore a new opportunity that’s just too good to pass up. If you are shutting down your 3PL warehouse and moving, you may need extra funds as a bridge loan until your business is up and running again. Companies that buy discontinued merchandise and closeouts often run into cash flow problems and borrow for this reason.
One more thing to consider: Many business owners want to pay back their loans as quickly as possible in an effort to become debt free. Again, it’s important to reduce debt, but doing so too quickly can cost your business. That’s because you may leave yourself short of cash. Or the extra money you’re devoting to debt reduction might be better spent on profitable growth projects. Solution—Compare your projected return on an investment to how much interest you’re saving by paying down your loan faster than required. If you expect to earn more investing the money in your business, consider slowing down your repayment pace.
For example, if you will need more money in coming months for buying closeout inventory and investing in closeouts, it may be better to keep the loan open so you don’t have to liquidate stock to generate cash. You can consider a warehouse liquidation sale to attract closeout brokers, but if you already have ample cash on hand this won’t be necessary.
Merchandise USA specializes in helping companies sell old inventory, liquidate overstock, and sell surplus inventory. We know you have many options when it comes to shutting down your 3PL or having an Amazon liquidation sale. That is why our 35+ years experience makes us a leader among liquidation buyers.
