Financing inventory is a problem that every business owner, large and small, comes up against at some point in their entrepreneurial career.
Whether you’re an established Amazon seller or you’ve just started out, using business credit cards to pay for your Amazon inventory may be an option if you’re planning to pay the balance in full and on time each month. For entrepreneurs that have excellent credit, it’s possible that your credit card spending limits are enough to make the necessary inventory purchases.
If you are considering using a credit card for business inventory purchases, it has inevitable pros and cons, some of which we will discuss below. Keep reading to the end of this post for an alternative suggestion on how Amazon inventory management with credit can be simplified so you can receive daily or weekly sales revenue (instead of Amazon’s typical net-30-60 terms as a vendor and up to 14 days as a seller).
Pros of Using Business Credit Cards for Financing Amazon Inventory
There are many positives to using credit cards to finance inventory so you don’t have a stockout of products, especially if you have good credit and you’re organized and able to keep solid and complete financial records that allow you keep on top of all payments when they become due.
In a previous blog post at Payability we discussed how credit cards can be used for business growth and inventory financing. Here are some of the main tips to help you with initial inventory financing:
- Purchasing Amazon inventory with credit cards gives you an extra line of credit (the credit limit on your cards) that allows you to instantly purchase the inventory you need, even if you don’t currently have the funds to pay for it right now.
- Applying for a credit card for business financing doesn’t take as long as you may think. If you’re applying for the card under your business’s name this usually won’t hurt your personal credit score; just be prepared to make your case to the bank manager.
- Look for credit cards that have no annual fee to keep costs down.
- Most credit cards now offer rewards, points, miles or cash back. Opting to earn cash back on purchases can give you an additional revenue stream.
- Many credit cards, like American Express, offer purchase protection, additional insurance, and fraud protection which makes spending with new suppliers more secure.
Cons of Using Business Credit Cards for Amazon Inventory
If you (or your business) fails to pay your credit card bill on time, or you carry a balance on your credit cards for an extended period, this can hurt your business credit and potentially even your personal credit for a long time to come. Not to mention the astronomical interest rates credit cards charge on your balance.
There are a number of cons that come with using credit cards to finance your Amazon inventory, and to many entrepreneurs these cons can outweigh the pros.
- Paying for new inventory on credit can be a precarious way to finance your business’s growth, as most credit cards (personal and business alike) come with high interest rates and stiff late fees. Becoming reliant on a business credit card to finance your inventory may soon see you drowning in fees.
- Even the most careful entrepreneur can be saddled with debt if they they use credit cards to pay for inventory and something outside of their control happens (the inventory is lost, damaged, or stolen), meaning they’re faced with a credit card bill to pay and no revenue with which to pay it.
- Failure to pay credit card bills could hurt your business for years by burying it in debt and potentially destroying personal credit if you use it to guarantee business cards.
A Better Way to Increase Cash Flow without the Stress
“There is a better way to increase cash flow,” as the saying goes, and we believe Payability is it. Outside of using credit cards, loans, merchant cash advances for your inventory funding, consider invoice factoring.
Amazon inventory management with credit can often make running your Amazon FBA business harder than it needs to be, as you’re taking precious time away from actually running your business to worry about whether you’re going to receive your revenue payments on time in order to pay off your credit cards.
With Payability, a daily payments financing solution, we make purchasing inventory easy by advancing payments to you based on the sales you’ve already sold on Amazon by purchasing your receivables already fulfilled on Amazon, called invoice factoring. That’s right, we pay you what you’re owed, when a customer pays for your product so you don’t have to wait up to 14 days to get paid by Amazon.
Now, instead of taking out numerous credit cards with high interest rates to pay for new inventory (or simply waiting around until Amazon pays you), you can now purchase inventory using cash flow from invoices that you’ve already fulfilled on Amazon. To find out more about Payability’s easy daily payments service for Amazon sellers, watch our video on how it works or contact us today with your questions.