As the economy continues to improve, retail sales have been on the rise, which could leave some companies with the need to replenish their inventory.
According to the U.S. Commerce Department, Americans spent more at retail stores last month despite the hike in Social Security taxes at the beginning of the year. Retail sales increased 1.1 percent in February when compared to the previous month.
Much of the bump can be attributed to higher gasoline prices, but excluding fuel purchases, retail sales still rose 0.6 percent last month. Core retail sales, which excludes purchases of gas, automobiles and building supplies, increased 0.4 percent on a monthly-basis.
Economists are encouraged by these numbers, according to the New York Times, as they could be signaling the economy is growing faster in the first quarter of the year than expected.
"This all suggests that the hit to spending from the payroll tax cut and higher gasoline prices, which reduce the amount of cash available to spend on other items hasn't been too bad," Paul Dales, senior U.S. economist at Capital Economics, told the Times. "The recent pickup in both employment and earnings growth bodes well for consumption growth later in the year, too."
With retail sales coming in higher than expected, small- to-medium sized retailers may be scrambling to replenish their inventory in order to keep their shelves stocked. Even though these companies may be selling more, they could still lack the necessary available capital or cash flow to qualify for a bank loan.
If the bank says "no," small- to-medium sized retailers can potentially turn to inventory financing, which allows them to use the product they currently have as collateral to obtain a revolving line of credit. Businesses looking for this type of financing can turn to Crossroads Financial to see if they qualify.