Amazon Ebay sellers
 

I am a bit confused. I hear about selling on Amazon and Ebay and how the big time sellers are making big money. Then I hear how these people need financing to maintain inventories or for other associated needs.

If you are making big money why do you need financing? Is it because it isn't as lucrative as advertised?

Obviously there is a disconnect. For me it is one dimensional but for a guy w/a larger IQ it is a piece of cake. If anyone can explain it, I'd appreciate it.

Re: Amazon Ebay sellers
 

The inventory forms the collateral for the loan. If the company defaults on the loan, the inventory can be sold to and the money repaid to the creditor. So the creditor stands to gain when the inventory sells at a profit. The money can be used by the company for various cashflow needs. For example, some companies use the cashflow to purchase advertising. Once the inventory has sold, ideally the profit covers all the costs involved, as well as the inventory loan itself.

In other cases, a business might not have enough inventory and will acquire financing to purchase more inventory to fulfill their orders. Imagine an Amazon seller who creates and tests products. If a product is selling well during the initial testing phase, they will need to ramp up inventory in order to fulfill future orders. This is where financing can help to acquire the necessary amount of inventory to firmly place the product on the market.

If a company has products that are selling well, it makes sense for creditors to make a bet on future sales. That's the general idea behind inventory financing.

Here's a quick overview: http://www.crossroadsfc.com/inventory-financing/

Hope that helps!