When Is The Right Time to Finance Growth?

In the ever-evolving world of consumer packaged goods (CPG), emerging brands face a unique set of challenges and opportunities. While innovation and creativity are essential for success, so is access to capital. Finding the right time to secure financing can be a pivotal moment for your CPG brand's growth trajectory. In this blog post, we'll explore the factors that indicate when it's time for emerging CPG brands to consider asset-based financing, and what the options are.

Seasonal Fluctuations

It is common for CPG brands to experience seasonal fluctuations in demand. If your product is highly seasonal, you may face the challenge of overstocking during peak seasons, and understocking during off-peak times. Asset-based financing can help you bridge the gap by providing the necessary funds to build inventory ahead of high-demand seasons while optimizing inventory levels during slower periods. It allows you to secure the necessary resources and inventory well in advance.

Whether it is for inventory preparations, increasing staffing levels, creating compelling marketing and advertising campaigns or to smooth out cash flow fluctuations - asset-based financing can be a valuable resource for CPG brands operating in seasonal markets.

Inventory Management Challenges

Inventory management challenges often manifest as stockouts – situations where you run out of popular products. This not only leads to immediate revenue loss but also risks losing customers to competitors.

On the flip side, excess inventory ties up working capital and can cause higher holding costs. These expenses include storage, insurance, and the opportunity cost of having capital tied up in unsold goods. Financing can provide the necessary liquidity to manage your inventory efficiently, striking the right balance between supply and demand.

As you can see, maintaining optimal inventory levels is crucial. Too much or too little inventory can harm your brand's bottom line. If you're struggling with inventory management or facing frequent stockouts, it's a clear signal that you need financing to fine-tune your supply chain and ensure you can meet customer demand consistently. Inventory financing can help you maintain healthy inventory levels, reducing the likelihood of stockouts and missed sales opportunities.

Rapid Growth

One of the most apparent signs that your emerging CPG brand needs financing is rapid growth.

As your customer base grows, your existing production facilities may not be sufficient to keep up with demand. The right financing allows you to invest in larger production spaces and technology upgrades to optimize efficiency. This scaling can help you meet the surge in orders without compromising product quality or delivery timelines.

Scaling your business also means expanding your workforce. Hiring more employees, from production staff to sales and marketing teams, is essential for maintaining quality and customer satisfaction. Financing can provide the necessary capital to recruit and train new talent, ensuring that your brand's growth is sustainable. With increased demand, maintaining the right level of inventory becomes a critical challenge. Overstocking ties up valuable capital, while understocking can lead to lost sales opportunities. Financing allows you to strike the right balance by investing in advanced inventory management systems, securing additional storage space, and stocking up on raw materials to meet customer orders promptly.

You may also want to fund comprehensive marketing campaigns, influencer partnerships, and branding initiatives that build brand awareness and customer loyalty, further fueling your growth trajectory.

Rapid growth is exciting, but it is crucial to scale your business efficiently and sustainably. By strategically utilizing financing, you can ensure that your CPG brand not only sustains its rapid growth but also establishes a strong and enduring presence in the competitive market.

Working Capital Needs

Working capital is the lifeblood of your daily operations. It's what keeps the lights on, pays employee salaries, and ensures that the machinery keeps running smoothly. Asset-based financing can help you cover these fundamental operational expenses, allowing you to focus on core activities without worrying about cash flow constraints.

Maintaining healthy working capital is essential for CPG brands, especially during periods of growth. Having sufficient liquidity is essential for navigating both everyday operations and growth opportunities. Asset-based financing can provide a cushion of working capital to cover operational expenses, pay employees, and address unforeseen challenges without disrupting your business's core functions. It offers a flexible solution to ensure that your capital needs are met, allowing you to maintain stability, invest in growth, and seize opportunities as they arise.

By optimizing your working capital management through financing, you can position your emerging CPG brand for long-term success in a competitive market. If you find yourself in a similar position, it is likely time for financing.

Market Expansion Opportunities

Introducing new products or product variations is a common strategy for CPG brands looking to grow. This may involve research and development, manufacturing process adjustments, and marketing efforts to promote the new offerings. Asset-based financing can provide the funds required for product innovation and diversification.

As an emerging CPG brand, expanding into new markets or introducing new product lines can be a game-changer. However, this expansion often requires substantial investment in marketing, distribution, and product development, money that many brands don't have just laying around.

If you find yourself looking to expand your product lines but are facing capital constraints, financing can provide the capital needed to seize these growth opportunities and diversify your brand's offerings.

Conclusion

Recognizing when it's the right moment to get financing can be a game-changer for your brand's growth and sustainability. Whether it's managing inventory, expanding into new markets, or fueling innovation, asset-based financing can provide the capital infusion you need to take your CPG brand to the next level.

Rapid growth is an exciting phase for any emerging CPG brand, but it comes with its set of challenges. Before seeking financing, carefully assess your brand's specific needs and opportunities. Consult with financial experts, explore your financing options, and create a comprehensive growth strategy. By doing so, you can confidently navigate the complexities of the CPG industry and position your brand for long-term success.

Remember, the right financing at the right time can be the key to unlocking your brand's full potential in the dynamic world of consumer packaged goods.

Assembled Brands is the leading asset-based lender for emerging CPG brands. Learn more about some of our portfolio brands here.