Although numerous factors, such as higher home prices, could have led to additional consumer spending in April, economists say that likely wasn't the case.
Economists surveyed by Bloomberg said consumer spending would be unchanged in April following a 0.2 percent rise in March. With no expected improvement in consumer spending, small U.S. retailers may need to utilize inventory financing to get through a period of lagging cash flow.
During times when cash flow might not be up to par, small- to medium-sized businesses can use this form of asset-based lending to stay operating at normal levels.
By using current inventory as collateral, retailers are able to obtain a revolving line of credit, which can be used to help out in difficult times.
Even though consumer spending didn't jump in April, it could improve in May, as confidence surged, according to the Conference Board.
The Board's Consumer Confidence Index increased from 69 in April to 76.2, while the Present Situation Index and Expectations Index also posted positive gains.
"Consumer Confidence posted another gain this month and is now at a five-year high," said Lynn Franco, director of economic indicators at The Conference Board. "Consumers' assessment of current business and labor-market conditions was more positive and they were considerably more upbeat about future economic and job prospects."
Should higher consumer confidence lead to increased spending, small- to medium-sized businesses could have another use for inventory financing – replenishing inventory.
With product coming off the shelves, these businesses may need to purchase additional inventory. Smaller companies can struggle to do this on their own, and are often turned away by banks. Luckily, the revolving line of credit obtained through inventory financing can be used to help keep shelves stocked.