June proved to be a rocky month for consumers, but confidence levels have picked back up in July, which could lead to increased demand for inventory financing.
With consumers feeling better about the economy and their personal financial situations, retail sales might increase, which would leave small- and medium-sized businesses with the need to replenish inventory. Asset-based lending is the perfect place for small companies to turn in this situation.
As the employment situation continues to improve, Americans are beginning to feel more confident in the economy. The Bloomberg Consumer Comfort Index is evidence of this, as it rose to minus-27.3 in the week ending July 21 – the highest level since January 2008.
"What we're seeing here is consumer sentiment continuing to move in a tight range likely based on Americans' perceptions of growing job security," said Joseph Brusuelas, senior economist at Bloomberg LP.
Improving employment situation aiding confidence
The past couple of months have been positive for the job market, which has lead to increased confidence among consumers.
One in four Americans believe now is a "good time" to find a quality job in the U.S., up from 17 percent in 2012 and 10 percent in 2011, according to Gallup.
As consumers begin to feel better about the employment situation and their job security, spending may pick up, potentially leading to higher retail sales levels.
"Job growth is starting to hum along," Jonathan Basile, director of U.S. economics at Credit Suisse Holdings USA, told Bloomberg. "All of it is laying the groundwork for more spending and more jobs. This virtuous cycle is really taking hold for the second half of the year."
Retailers might need to rely on inventory financing with consumer confidence rising
As Americans start to feel better about the economy and their finances, spending at small- and medium-sized retailers could increase. If sales levels do rise, these businesses will likely need to replenish stock to keep their shelves full.
The first place a retailer may turn is a traditional bank, but smaller companies are often turned away due to limited available capital, lagging cash flow or even a poor credit score.
When told "No" by a bank, retailers can opt for inventory financing, which enables a business to use current product as collateral to obtain a revolving line of credit, which provides funds to keep shelves stocked.