Is Returns Financing the Answer to Your Pre-Holiday Cash Crunch?
Ahead of this year’s holiday season and Black Friday, e-commerce brands are using revenue financing to avoid inventory issues and still have funds for marketing. Find out how!
The holiday season is right around the corner, and together with Black Friday Cyber Monday (BFCM), this means one thing for e-commerce brands across the world: time to stock up on inventory.
Juggling inventory management during normal times is no walk in the park — add the holidays and BFCM on top and it can feel like an insurmountable challenge. Too often, brands must make tough choices between core activities – like marketing and product development — just to keep inventory afloat.
But managing inventory shouldn’t be a hindrance to your other core business activities, tying up critical resources during the most important periods of the year. Inventory should complement the other parts of your business, enabling more delighted and satisfied customers.
And that’s where returns financing comes in. Following a couple unexpected years in which ecommerce experienced a spectacular rise, supply chains were stretched, and lead times extended, brands have had to adapt their approach to inventory, as well as their strategy for online presence.
If last year’s BFCM was an indication, the 2021 edition, together with this year’s holiday season, are poised to be unlike any seen before, with increasingly complex challenges. What does this mean for brands with a strong e-commerce presence? To prevent working capital issues, stay stocked on your most popular items, and be able to make an extra little marketing push, your brand may benefit from revenue-based financing.
What is revenue-based financing?
Revenue-based financing, also known as “royalty-based financing” or “receivable financing”, involves borrowing money in exchange for a fixed percentage of ongoing gross revenues.
It is a form of asset-based financing that allows small or growing businesses quick access to capital, often so they can improve cash flow, pay suppliers, and further invest in marketing and other activities.
In the case of Black Friday and the holiday season, this type of financing can free up capital needed to invest in safety inventory, make a targeted marketing push, or scale your customer support team, to name a few.
How does revenue-based financing work?
Revenue-based financing allows businesses to borrow money against future revenues, with an outside party providing capital to the business and charging either a fee or a percentage of the amount borrowed.
The funding company or individual receives a percentage of ongoing gross revenues until the borrowed amount is paid back. There are no fixed payments, with repayment being made in regular installment as a percentage of ongoing revenues.
This short-term form of borrowing can help companies to access capital more easily, which can be used to pay business expenses (like increasing stock ahead of high-demand seasons).
Particularly in the early days of a business, receiving a cash advance on future sales can help boost growth by providing you with quick access to short-term liquidity.
How Swap can help
Swap’s data-driven revenue-based financing can help e-commerce businesses to stay on top of operations and inventory during busy times of the year, without sacrificing a high-quality customer experience and marketing spend. Swap’s integrated returns and financing solution will provide you with funding equal to the expected value of your customer returns for a set period, generally 3-6 months.
Example: Say you expect an average of 100,000 in monthly revenue for the three months from November to December, with an average return rate of 15%. The expected returns value is 15,000 per month, or 45,000 for the three-month period. Swap will offer financing for this amount!
By enabling Swap’s ultra-consumer-friendly returns & exchanges solution, Swap expects that refunds on those returns to drop significantly, with average revenue retention on returned orders increasing by 31% when using Swap.
With instant funding and additional revenue to boot, Swap is confident that you’ll be taking your game to the next level this holiday season.
Connect your accounts today to find out whether you qualify for equity-free, no-strings-attached funding.