Owning a liquor store means steady business but slim margins, so sometimes you need a little extra cash to get from A to B comfortably. When cash gets tight, a catch-22 forms where you cannot afford to buy inventory, yet inventory is what brings the money in. Other times, the expense of inventory holds back your business from seizing lucrative opportunities to grow or expand.
In these situations, liquor store financing for inventory purchases can be exactly what the business needs to stay afloat and to get to the next stage of growth. By seeking out a Merchant Cash Advance, a new Line of Credit, or other sources of flexible financing, you can purchase the inventory you need to stay afloat or grow now and pay back your loan through an accommodating arrangement later.
Read on to explore some of the scenarios where financing your inventory purchases makes perfect sense in an industry where bottles are the only thing that can bring in the bucks.
Make no mistake: alcohol distributor monopolies put a stranglehold on most small business owners.
When writing about his “accidental” purchase of a liquor store, entrepreneur Justin Holman recounts his first experiences dealing with distributors. “The Budweiser distributor welcomed us to the industry by requiring cash upon delivery for the first 90 days. No checks. No 30-day net invoice. Not even a money order. Cash on the barrelhead. Nice manners, Bud.”
Arrangements like these can tighten already-limited cash flows, potentially creating bottlenecks in growth unless you have capital set aside to handle the impact. Otherwise, you are stuck paying off distributors in limited transactions as inventory trickles in.
Unfortunately, limiting your inventory purchases in this way also further limits your cash flow, creating the aforementioned vicious cycle. You can break the cycle and reduce the negative impact that strict distributor deals have on your budget with a little extra financing from a specialty liquor store finance lender.
The other issue with obtaining inventory in dribs and drabs is that it can squeeze your margins further. Many distributors hold regional monopolies on certain brand names or products, so they have no price competition. The only way to lower your wholesale costs is to buy in bulk.
Using package store loans or financing arrangements can therefore actually help you save in the long run. You may even be able to put a dent in your competition by passing lower prices on to your customers.
Growing your customer base often demands stocking products that bring in new demographics. Paying for these new SKUs out of pocket could put a dent in your cash flow and create inordinate risk, but, with liquor store loans, you could pay for all purchases up front and have less pressure to turnover stock hastily.
Add on specialty bourbons, craft beers, more wines, more bottle sizes and other SKUs to enhance the appeal of your store and grow your sales.
Not every store renovation or improvement project requires its own financing, but using credit to make inventory purchases can add to your cash on-hand for smaller projects. You can use the freed-up capital to build a beer cave, improve your shelving, change your display approach or just get a little repainting done.
Since inventory is often your biggest cost, lessening its impact on your budget gives you the freedom to take on projects that improve the store experience for your customers and boost sales.
Explore all of these possibilities and more when you take a look at the many liquor store financing options available. ARF Financial provides convenient loans, lines of credit and financing products through our partnerships with lenders throughout the country. Get the extra capital you need to stay profitable, and pay it back on your own terms through our generous repayment options.
If you’re interested in securing a new source of financing for your liquor store, you can request a free, no-obligation quote right now to explore your options.