Although consumer confidence took a small hit to begin June, it remained elevated. As a result, spending could pick up in the near future, and potentially lead to higher sales levels at U.S. retailers.
Should this occur, small- to medium-sized businesses may need to utilize inventory financing to ensure shelves remain stocked.
The Thomson Reuters/University of Michigan preliminary index of consumer sentiment declined to 82.7 in June from 84.5 in the previous month, which was a six-year high. Economists surveyed by Bloomberg expected no change in sentiment levels.
Despite the slight dip, steady hiring gains along with rising equity and house prices have kept confidence among consumers high.
"The stock market peaked in late May, so you may be seeing some of that being reflected in the number," Michael Feroli, chief U.S. economist at JPMorgan Chase & Co, told Bloomberg. "In general, the consumer is in a relatively good position."
Higher confidence levels have already helped boost the retail market, as sales hit a seasonally adjusted rate of $421.1 billion in May, an increase of 0.6 percent from the previous month and a 4.3 percent year-over-year improvement, according to the U.S. Department of Commerce.
If sales continue to increase, small-to medium-sized businesses may increasingly need to rely on retail inventory financing. With product coming off the shelves, inventory needs to be replenished, but retailers of this size can struggle to buy new product on their own dime, and banks often turn them away.
That being said, small-to medium-sized retailers may need to turn to inventory financing for assistance. This type of asset-based lending allows a company to use current inventory as collateral to obtain a revolving line of credit, which, in turn, can be used to purchase additional product to keep shelves stocked.