About Supplier Financing
A supplier provides goods and products to retailers, who then sell them to customers. Whether a retailer is purchasing their inventory directly from a manufacturer or distributor, the supplier is a vital moving part in the supply chain. Businesses and customers rely on you to provide them with the goods in a timely manner. That means keeping your inventory stocked and your cash flowing. In order to do so, supplier financing may be necessary.
Suppliers face a lot of upfront costs. Warehouse space, equipment, and inventory are all needed in order to operate as a successful supplier. The technology that tracks inventory and manages product creation can be costly, too. Despite the heavy investments that suppliers need to make, they’re a vital piece of the supply chain, so it’s a worthwhile business to start and grow.
If you, as a supplier, have a steady flow of cash, you can make sure that your warehouse is stocked for sudden spikes in demand and prepare for product launches. You work closely with brands to plan such events, so you’ll be able to give them accurate projections when you have the money to keep up with it. So, don’t underestimate the power of supplier financing and the financing solutions that provide it.
Supplier Financing Opportunities
Searching for the right type of supplier financing can be difficult. There are many lenders and loans to choose from, not to mention alternative funding solutions. You’ll need to consider your unique budget and future plans before applying. Can you afford to commit to a large monthly payment? Would you prefer a consistent source of cash?
Do your research on each type of financing, and then pick the funding company or bank that fits your specifications. Don’t forget that every lender has different guidelines, so make sure you’re eligible for their type of funding before delving into the application process.
Bank loan
A bank loan is a lump sum of capital you receive from a bank. It often involves strict eligibility requirements, such as several years as an active business and a great credit score. Collateral may be required if you don’t meet their expectations for an unsecured loan. This can take the form of property, inventory, invoices, or equipment — anything that is a business asset. Startups and young businesses may want to look elsewhere for funding, as most banks won’t work with anyone who doesn’t have a high monthly sales volume.
Pros
- Large amount of capital available
- Low interest rates compared to other funding sources
- Your interest rates are tax-deductible
Cons
- Long application process
- Low approval rates
- Strict eligibility guidelines
- May require collateral and a credit check
If you’re a business owner who is planning on expanding, then a business loan may be in order. The high funding limit can provide you with the necessary funding. However, keep in mind that banks require a large monthly repayment. Look over your budget and plan ahead before committing to such a large monthly cost. Each bank will have unique requirements, so do your research before signing on the dotted line. Consider your chances of approval, as well as the collateral you have to offer if they don’t approve an unsecured loan.
Revolving line of credit
A revolving line of credit can be compared to the way a credit card works. As you pay off the loan, more money becomes available to you. You also only pay interest on the portion you’re currently using. It’s a useful type of funding if you want an emergency fund or help financing day-to-day operations, such as payroll, rent, utilities, and inventory. The amount you’ll have access to will be determined by your business history and possibly your credit score.
Pros
- Provides consistent cash flow
- Helps build business credit
- Complete control over spending
- No collateral needed
Cons
- There may be extra fees
- Higher interest rates than other types of loans
- The borrowing limit is often low
A business who is in need of quick cash to prepare for a launch or cover surprise expenses can benefit from this type of funding. It’s there when you need it, and as long as you pay the monthly charges, then you’ll stay in good standing with the lender. This type of financing is great for seasonal businesses, as well, who have slow quarters.
Crowdfunding
If you have the gift of salesmanship, are a creative person, and have an eye-catching or unique idea, then crowdfunding may be the way to go. Crowdfunding is when numerous investors give a business or individual varying amounts of capital. While the investments may be small, they add up to a significant amount of funding. In order to secure this type of funding, you pitch a campaign idea to the investors, and if they like your idea they’ll supply you with the necessary funding to launch it.
Pros
- You usually don’t have to repay the investment
- Access to quick cash
- No credit checks or business history evaluations needed
Cons
- Launching a campaign is time consuming and requires a great deal of effort
- Idea theft is possible
- Many crowdfunding campaigns fail to get funded
If you don’t qualify for other loans, crowdfunding may be the way to go. While launching a campaign takes time and effort, the benefits are many. You don’t have to pay back the money investors supply you, even if your idea fails. Plus, you’ll be able to repay your investors with a reward or equity, depending on your chosen type of crowdfunding. There are many online platforms that connect businesses with investors, but keep in mind that a significant portion of crowdfunding campaigns fail to reach their goals.
Equity financing
Equity financing is the process of selling shares of a business to investors. This dilutes the ownership, but can be a great way to quickly secure large amounts of capital. You can use it to cover short-term costs, such as payroll and rent, or you can concentrate on scaling and expanding. The most common forms of equity financing are through angel investors and venture capitalists. Both of these types of investors will provide you with money as well as expertise and advice in exchange for a share of future profits and often a stake in your decision making.
Pros
- Get advice from experienced investors
- You gain business partners
- You don’t have to repay the investments in the traditional sense
Cons
- Profits have to be shared among all the shareholders
- Ownership is diluted
- The investor’s cut can be more costly than the interest on a traditional loan
- The shareholders’ dividends are not tax deductible
Obtaining equity financing often requires networking as well as pitching your idea to potential investors. Large sums of money are available, but they come with a price. If you want to keep full control of your business, equity financing is not for you.
Business grant
A business grant may be supplied by private organizations, the state, or the federal government. It’s a lump sum of money that an institution provides to certain businesses or individuals in order to further a specific goal. You don’t have to pay back this type of funding, however, it is very difficult to obtain. There are strict eligibility requirements to meet, and the application process is very long. You may not find a grant that’s relevant to you or your business, either.
Pros
- No repayment needed
- Wide variety of sources
- Your business credibility will be boosted if approved
Cons
- The application process is lengthy
- Strict guidelines
- It’s only a short-term solution
- Very competitive and difficult to acquire
If you’re a business owner who can’t afford to pay a large monthly sum to a bank or don’t qualify for a traditional loan, then a grant may be worth the hassle. Do your research before applying, as you may not meet their eligibility requirements. You don’t want to do all that work just to be rejected. Many businesses who do qualify are turned down because grants tend to be very competitive. If you do manage to get a grant, you’ll have to continue to work with the grant-giving body, as they control what you spend it on and when you do.
Revenue-based financing
Revenue-based financing is a flexible type of funding that offers capital to companies that generate revenue on an ongoing basis. The funder will provide you with the cash you need, which you then are required to repay as a percentage of future sales until the loan is fulfilled. This type of financing is great for seasonal businesses, or those with fluctuating sales, since they won’t need to worry about a high fixed monthly payment.
Pros
- Quick access to funding
- You retain full ownership of your business
- Payments fluctuate, depending on your sales volume
Cons
- Repayment requires steady revenue
- Not available to all businesses
- The cost of capital may be more than interest on a traditional loan
If your business doesn’t qualify for regular loans, then this may be a good option for you. As long as you have steady revenue flowing in, revenue-based financing providers don’t need to check your credit score or business history. They don’t take any equity in your business, either.
Merchant cash advance
A merchant cash advance is a lump sum investment that is paid back with a percentage of your future credit and debit card sales. It’s often easier to get approved for this type of loan, as they have more lenient requirements. As long as you have been in business for several months and bring in revenue through credit and debit card sales, you’ll likely get approved.
Pros
- Quick access to cash
- No collateral is needed
- Flexible contracts
- Lenient eligibility requirements
Cons
- Higher interest compared to other types of loans
- It doesn’t benefit your credit history
- The lender has the right to take money out of your account, regardless of sales volume
Those who need a quick solution to their lack of funds will benefit from a merchant cash advance. You’ll have complete control over the funds, as well. If you need to boost inventory or put money into your advertising budget, you can. Most lenders won’t give you monthly spending limits, either.
8fig: An Alternative to Supplier Financing
8fig is a financing solution for eCommerce sellers that provides you with the opportunity to grow. We supply the necessary funding and growth platform to those who are looking for tools to succeed. You’ll be able to take control of your finances without worrying about the strict eligibility requirements that come with banks and other lenders.
Why use 8fig for financing your business
8fig is unique compared to other financing solutions due to our speed, flexibility, and continuity. Weeks of paperwork can lead to months of waiting for necessary funding. 8fig understands that most businesses can’t afford to wait and will work with you to meet your goals in a timely manner. Plus, 8fig funding is continuous, which means that instead of one lump-sum, you’ll get cash infusions aligned to your supply chain needs. This ensures you have an optimized cash flow, giving you the ability to stay in stock and reach your sales goals.
How 8fig works
1. Apply
The application process is fast and easy. Answer some questions about your business and sales, and then provide basic information about your supply chain stages and expenses.
2. Connect your store and bank account
In order to provide you with an optimized Growth Plan, 8fig requires that you connect your store and bank account to the 8fig platform.
3. Get funded
With 8fig, you can get funded in just days. Since 8fig funding is continuous, you receive capital infusions into your business right when you need it.
4. Make adjustments
If something changes and you need to adjust your payments, remittance schedules, or even funding amount, you can always do so thanks to 8fig’s flexibility.
5. Grow your business
All that’s left to do is sell, sell, sell. With 8fig, businesses are able to scale 2.5x as fast.
What 8fig offers in addition to financing
Funding isn’t the only thing that 8fig provides. We also have useful tools for you to use for your growing business, such as ways to analyze your sales and improve business operations. You can count on 8fig to guide you through all the steps, as we are your growth partner, not just a funding company. That being said, we never take equity, either.
8fig believes that when you win, we win. It’s a simple philosophy that provides comfort and confidence during business interactions. Offering you tools that help you plan and track your supply chain and manage your cash flow is just part of our partnership.
Who is eligible for 8fig supplier financing
Compared to other funders, 8fig has lenient requirements and a quick application process. Waiting for approvals and funding can be stressful, but 8fig is known for our easy process. Banks require credit scores, collateral, years of business history, and a high sales count. This isn’t always possible, as most businesses need money to make money. 8fig doesn’t require any of that, and is always equity-free.
In order to secure funding from 8fig, you must simply be in business for at least 12 months, have an annual revenue of over $100,000, and have made an average of $8,000 in sales per month for the last three months.
How to apply for 8fig financing
It’s easy to apply for 8fig financing, and it only takes a few minutes. Simply answer the questions and follow the prompts and you’ll get funded in no time!