Strong start to back-to-school shopping season could boost inventory financing demand

The National Retail Federation projected a slow back-to-school shopping season, but early numbers show that hasn't been the case. With sales picking up at retailers across the country, inventory financing may need to be utilized to keep shelves stocked. 

According to the NRF's 2013 Back-to-School and Back-to-College Surveys, the average family with children in grades K-12 have already completed 52.1 percent of shopping, up from 40.1 percent the previous year and the highest in survey history. Meanwhile, college families have finished 49.5 percent of shopping. In total, NRF projects school and college spending will hit $72.5 billion this year. 

"Given the historic level of early-bird shoppers we've seen this year, it is evident that many families still consider price and value when looking for their back-to-school and college needs," said NRF president and CEO Matthew Shay. "Shopping early and often has become a sign of the times as budget-conscious consumers aim to ease the brunt of large spending events."

It appears as though more retailers are offering sales, coupons and promotions, as many consumers listed these were the influence of more than 40 percent of purchases made, compared to 38.5 percent last year. 

Shay added that last-minute shoppers headed into Labor Day weekend can still expect to see numerous promotions and sales as retailers attempt to move back-to-school items off the shelves to make room for fall merchandise. As a result, sales levels are likely going to pick up steam in the coming weeks, as consumers take advantage of steep discounts. 

Overall, consumer spending is picking up
While back-to-school shopping is certainly helping boost retail sales in August, consumers had already been spending more money in July. Economists surveyed by Bloomberg project spending likely increased for the third consecutive month, with a 0.3 percent bump in the purchase of goods and services. 

"We're seeing a pick up in multiple categories – that's the promising sign that consumer spending might be a little bit stronger in the third quarter," Michael Brown, economist with Wells Fargo Securities LLC, told Bloomberg. "We've seen wage and salary growth continue to expand with the pace of employment. That's helped support some additional consumer activity."

Inventory financing demand may rise with higher spending levels
As small- and medium-sized retailers begin to see product coming off the shelves, there will be a need to replenish inventory. Smaller companies often struggle to do this on their own dime, and can be turned away by banks for any number of reasons, such as limited available capital or poor credit. 

Fortunately, inventory financing is available to provide monetary assistance to small- and medium-sized businesses in need. Using current product as collateral, retailers can obtain a revolving line of credit, which, in turn, can be drawn from to purchase additional inventory to ensure shelves are never empty. Perhaps the biggest advantage of this form of asset-based lending is that it allows retailers to keep stockrooms full without tying up available capital.