Savvy Surplus Inventory Transactions: What is a Trade Credit?

Savvy Surplus Inventory Transactions: What is a Trade Credit?

You have finally accepted that it’s time to face the music. What’s the music you ask? A little tune we like to call surplus inventory. The reasons for the surplus are endless, but as always – the show must go on. But, what are your options?

Partnering with a trade company is a smart and efficient way to clear your surplus inventory out while maintaining maximum value. The main three options are cash liquidation, trade credits or a hybrid of the two. But what do these options really mean?

What Is a Trade Credit?

Trade credits are a savvy way for companies to hit all the right notes when it comes to managing inventory. Just like a well-composed song that balances melody, harmony and rhythm, trade credits allow companies to find the perfect balance between supply and demand. 

When a company has surplus inventory that needs to move, trade credits can be used as a strategic instrument to create a harmonious exchange. It’s like a musical duet where both parties benefit from the collaboration, and the result is a beautiful melody of success. 

How Does the Trade Play Out?

When you enter a trade deal, you exchange a diminished or unwanted asset for a trade credit that can be used to help offset the total cost of a planned media spend. Especially in times of low consumer demand and economic uncertainty, a trade credit can be a valuable asset to promote new and incoming inventory without digging deeper into your pockets. 

Here is an example: 

Say you are stuck with a half a million MP3 players that have significantly diminished in value. The diminished inventory is purchased by a trade company in the form of a trade credit in an amount equal to the value on your books, restoring a pretty penny of the lost value. The trade credit can now be used as partial payment along with cash to offset the costs of your planned advertising budget. Now that’s something to sing about.

When In Doubt Trade It Out

In a fluctuating business climate, trade has the power to reduce cash needs and replace with slow moving inventory.  For example, maybe a client wants to increase their ad spend or not cut as much as planned. The client can trade their slow moving inventory out for media spend, which will help reduce expenses and costs of advertising on their own.  Using inventory or even gift cards (for retailers) can extend your ad budget without finding more cash. If the cash offers are too low and the client has a reasonable amount of spending in trade eligible categories, then Trade Credit will make the most sense.

Trade holds the potential to mitigate cash requirements and substitute them with slow-moving inventory, especially in a fluctuating business environment. Let’s consider an instance where a client wishes to increase their advertising spend or avoid excessive cuts. By exchanging their slow-moving inventory for media spend, the client can effectively curtail expenses and mitigate the costs associated with advertising on their own. This approach enables the extension of the advertising budget without requiring additional cash, utilizing assets like inventory or gift cards (applicable to retailers). However, if the cash offers fall below expectations and the client possesses a reasonable amount of spending in trade eligible categories, opting for trade credit emerges as the most sensible choice.

The Harmonious Benefits of Trade Credits

Trade credits are like the sweet sound of a melody to a business owner’s ears. By accepting trade credits in exchange for surplus inventory, businesses can improve their cash flow. But trade credits do more than just improve cash flow. They can also help build and nurture relationships with vendors. Like a well-orchestrated symphony, trade credits can create harmonious partnerships between businesses and vendors that benefit both parties. 

By utilizing trade credits, companies can find the perfect pitch for their inventory and hit all the right notes in their business endeavors. So, strike up the band and let the trade credits flow – it’s a win-win for everyone involved. 

Need more advice on trade? Call us today!

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