Despite slow growth in the past three months, small business optimism took a hit in March, which could be a bad sign for small- to medium-sized retailers.
With confidence in the future waning, these businesses may begin to see less sales activity. Should that be the case, cash flow could drop below normal levels, which can make it difficult to continue regular operations. To get through these tough times, small- to medium-sized retailers could take advantage of inventory financing.
According to the National Federation of Independent Business, the March Index of Small Business Optimism declined 1.3 points to 89.5. Since the beginning of the economic recovery in 2009, this index has averaged 90.7.
The three index components with the greatest drop were labor market indicators, inventory investment plans and sales expectations. Plans to increase employment and inventories dropped four points, while sales expectations fell five points.
"After another false start, small business confidence has sputtered and stalled again," said Bill Dunkelberg, NFIB chief economist. "For the sector that produces half the private GDP and employs half the private sector workforce – the fact that they are not growing, not hiring, not borrowing and not expanding like they should be, is evidence enough that the uncertainty is slowing the economy."
During periods of economic uncertainty, small- to medium-sized businesses can struggle, as cash flow can dip below normal levels. Those that are in this type of situation could benefit from inventory financing.
This form of asset-based lending allows a company to use its current inventory as collateral to obtain a revolving line of credit, which can be used to help replenish inventory and get through times when cash flow is lagging.