Stock costs money before it earns any.
Supermarkets, restaurants and e-commerce run the same problem in different shapes. You pay for the stock, then you sell it, and the gap between those two things is where the business either has room or it does not.
Three different businesses
Independent supermarkets and convenience
High volume, thin margins, constant restocking. Supplier terms decide everything. A good price on a large order is worth taking and needs cash on the day.
Restaurants and hospitality
Costs weekly, revenue daily. A quiet fortnight moves through the accounts immediately. Refurbishment, kitchen equipment and a second site are the usual reasons for real capital.
E-commerce
Containers. Stock is ordered and paid for months before it sells, often from overseas, and the working capital sits in transit. Peak season is funded well before peak season arrives.
This sector is marketed at harder than any other, and the product pushed hardest is a merchant cash advance.
On merchant cash advances
There is a reason for that. Retail and e-commerce businesses run all of their revenue through a card acquirer in real time, which makes the data rich and easy to underwrite, so eligibility is generous and approval is fast.
It has its place. Repayment flexes with takings, which suits genuinely unpredictable revenue.
It is also frequently the wrong structure, sold to businesses that could have had a term facility at a fraction of the cost. A business taking a second advance to clear the first is not unusual here, and by that point the options have narrowed considerably.
If an advance is right, we will arrange one. Often it is not, and a business that has been on one for a while is usually better served restructuring it into something with a fixed cost and an end date.
What it gets used for
Stock
Bought ahead of a season, not halfway through it.
Supplier discounts
Taking one that requires payment up front.
Premises and equipment
A refit, new equipment, or a second site.
Timing
Smoothing the gap between paying for stock and selling it, without running the business account permanently negative.
If you are on an advance and it no longer makes sense, that is worth a conversation before the next one.
What we need
Send six months of statements and you will know where you stand, usually the same day.
Six months of business bank statements. For card-heavy businesses the statements show the takings pattern directly, and that is what any lending partner underwrites against.