Although the economy remains shaky, consumers are spending more money each day, which could be a positive sign for future retail sales.
With consumers spending more, small- to medium-sized retailers might encounter the need to replenish inventory in the near future. Businesses of this size can struggle to obtain a loan from a bank, as capital may be limited or cash flow could be low, but inventory financing is an available option.
According to Gallup, spending has increased among upper-, middle- and lower-income groups. In 2009, self-reported average daily spending totaled $59. That number increased to $89 per day in March 2013, despite the increase in payroll taxes and federal sequestration budget cuts.
Between January and March, spending among upper-income Americans – those who earn more than $90,000 annually – increased from $138 per day to $166. Meanwhile, spending among consumers who make less than $90,000 a year jumped from $70 to $75 a day in that same period.
Both income groups surpassed their March highs for daily spending of the past five years.
With retail sales lagging in March, the news that consumers are spending more each day could be a welcome sign. According to the U.S. Department of Commerce, sales totaled $418.3 billion in March, a 0.4 percent drop from the previous month.
Should the daily spending increase among all income groups leak into the retail sector, small- to medium-sized businesses could need to replenish inventory.
However, if cash flows are below normal levels or available capital is limited, these business could struggle to obtain a loan from a bank for these purposes. With that said, inventory financing could prove helpful, as this form of asset-based lending allows small- to medium-sized retailers to use current product as collateral to obtain a revolving line or credit.