Consumer spending could remain modest with millions still underwater on their mortgages

Although many homeowners have been able to regain equity lost during the financial crisis, millions remain underwater, which could hold consumer spending in check. 

Should this lead to consumers being conservative with spending, small- to medium-sized retailers might need to turn to inventory financing for assistance. Without sales increases, businesses may enter a period where cash flow falls below normal levels. During these times, it can be difficult to operate, but inventory financing can help. 

As of the first quarter, more than 13 million homeowners with a mortgage were still in negative equity, according to the first quarter Zillow Negative Equity Report

"Reaching positive equity, even barely, is an important milestone," said Zillow chief economist Stan Humphries. "But things like real estate agents' fees and a down payment for the next home traditionally come out of the proceeds from the prior home's sale. Without enough equity, these costs will instead have to come out of a homeowner's pocket, leaving many still stuck."

Even though 13 million homeowners still remain underwater, home prices have been on the rise, which helped the negative equity rate to fall to 25.4 percent in the first three months of the year. 

Whether the declining negative equity rate leads to more consumer spending, or the millions still underwater holds spending back, small businesses can potentially benefit from retail inventory financing

If sales accelerate, retailers can use this type of asset-based lending to help replenish inventory. However, stagnant sales could have these businesses turning to this financing option to help get through a period where cash flow is lagging. All of this is possible through the ability to obtain a revolving line of credit using current inventory as collateral.