The past couple of months have been strong for U.S. retailers, but that could change in the near future, with a drop in consumer confidence. If Americans begin to spend less as a result, small- and medium-sized retailers may need to rely on inventory financing to help cover operating expenses.
Consumers were feeling less confident about the economy in early September, as the Thomson Reuters/University of Michigan preliminary index of consumer sentiment fell to 76.8, from 82.1 in August. This marked the lowest level the index has been at since April.
"If changes in monetary and fiscal policies act to slow economic growth, declining confidence could lengthen and deepen the slowdown," said Richard Curtin, chief economist at Surveys of Consumers.
Retailers already saw a slowing in sales during August, so another month could lead many businesses to struggle. According to the U.S. Department of Commerce, sales rose less than forecast, increasing 0.2 percent – the smallest gain in four months. Economists surveyed by Bloomberg called for a 0.5 percent gain.
Should September's dip in consumer sentiment lead to a decline in retail sales, inventory financing could prove beneficial. Just because sales levels fall, that doesn't mean that operating expenses will as well. That said, small businesses could struggle to afford certain costs when consumers aren't spending money.
Fortunately, inventory financing is available to provide assistance. Small- and medium-sized retailers in need of help can use current inventory as collateral to obtain a revolving line of credit, which, in turn, can be drawn from to cover expenses during seasonal lulls.
With this type of asset-based lending, small businesses no longer have to be concerned about being forced to close the doors during stretches when sales levels aren't strong.