Wholesalers saw inventories take a major hit in February, which could impede their ability to fill large orders.
When wholesales receive orders bigger than they usually handle, they can be difficult to fill, especially if inventory levels are declining. This could force these companies to miss out on a great opportunity, but purchase order financing could potentially help out.
According to the U.S. Department of Commerce, wholesale inventories dropped 0.3 percent in February, which was the largest month-over-month decrease since September 2011. This came as somewhat of a surprise, as economists surveyed by Dow Jones Newswires projected a 0.6 percent increase in inventories.
Part of the reasoning behind the steep decline in inventories was the bump in sales. Sales at wholesalers totaled $422.5 billion, a 1.7 percent improvement from the previous month and 3.7 percent year-over-year increase.
Meanwhile, the inventories to sales ratio, which measures how many months it would take a firm to reduce its current inventory, hit 1.19, a slight drop from last month's figure of 1.21.
With inventories on the decline, wholesalers could find it difficult to fill an order larger than they normally handle. For example, if one of these firms gets a massive order from a big-box retailer, low inventory levels could prevent them from taking advantage of this tremendous opportunity.
Should a wholesaler find itself in this type of situation, it could take advantage of purchase order financing. This type of lending agreement allows wholesalers to receive 100 percent of the funds needed to fill an order.
In some instances, companies are forced to sell off part of their business to fill these types of game changing orders, but that isn't necessary if purchase order financing is available.