With home values on the rise and fuel costs easing a bit, consumers have begun to feel more comfortable about their finances, which could be a sign for the retail sector.
Sales for retailers have struggled in the past couple months, which might have forced many small- to medium-sized businesses into a period of lagging cash flow. This can make it difficult to operate at normal levels, but inventory financing might be available to help out during these trying times.
According to the Bloomberg Consumer Comfort Index, sentiment held close to a five-year high during the week ending April 21. The index reading was minus-29.9, which is 4.5 points higher than a month ago and 5.9 points higher than a year ago at the same time.
Meanwhile, U.S. households were the most optimistic about their finances than in the past 10 months, which could mean that the slowdown in consumer spending will only be temporary – a welcome sign for retailers.
"Americans are feeling more secure about their own financial situation," said Joseph Brusealas, senior economist at Bloomberg. "Household wealth is recovering. The decline in gasoline prices is providing some relief to households across the income spectrum."
As consumers begin to spend more money, retailers could see additional business, after sales lagged in March. With that said, these companies may need to replenish inventory. To do so, some may turn to a bank, but if that isn't an option, inventory financing could be available.
This type of asset-based lending allows a small- to medium-sized retailer to use current inventory as collateral to obtain a revolving line of credit, which can be used to help keep shelves stocked. Businesses that don't see increased sales can also use inventory financing to help get through times when cash flow might fall below normal levels.