How Inventory Financing Works (Interview with David Koifman at Kickfurther)

What happens if your products are really successful?

Let’s say there’s huge demand for your eCom products. But you just don’t have the capital to fill that demand.

What do you do?

Turns out, there’s a service called inventory financing that can sometimes help in situations like this. That’s why I’ve brought on David Koifman, the VP of Sales at Kickfurther, a company that specializes in inventory financing.

We’re going to cut right to the interview in just a minute. But real quick – my name is Brandon, this video is brought to you by Fulfillrite. We ship orders for eCommerce and crowdfunding. Link below for more details. Quotes are free!

One last quick note – we edited with a light touch on this interview because we wanted to keep it simple, a little lo-fi, and honest, just like two professionals on a Zoom call.

Alright, let’s cut to the interview!

Raw Transcript

This transcript is AI-generated and may contain minor inaccuracies.

00:00.00
Brandon Rollins
Right? So David first of all, thank you so much for coming on. Absolutely so to start us off can you briefly explain to me what kick further is and what the company does.

00:02.66
David Koifman
Thanks for having me Brandon. It’s awesome to be here with you.

00:15.53
David Koifman
Kickfrither is an inventory financing platform. We’ve been around nine years now and our goal is to provide business owners who either produce or purchase physical goods and then sell them later at a profit to have access to the capital. To pay for the the goods as they produce them essentially every single business that is growing fast the faster they’re growing the more they feel this cash flow pinch exhibits a tightness when they have to pay for stuff that they plan on selling but it takes so much time. From the moment that they have to issue the payment to their manufacturers or their raw materials producers until the point in time where those materials turn into finished goods and then get sent to a buyer and then sometimes even get paid for by the buyer months later based on payment terms. So. There’s a variety of a variety of different timelines that ah can occur from point a to point b and we’ve developed a program that is custom built for every customer’s unique timeline case. To provide them the capital to pay for the stuff and not require their payments until the stuff gets turned into cash on the other side.

01:33.19
Brandon Rollins
So It’s interesting because it sounds like what you guys do essentially is if a company is doing really well. They’ve got a product that is just going to be a smash success and you know this and you have the data to prove this. You just make sure that they are not. Limited by the amount of capital they have available to them. Um, in order to meet the demand. That’s there.

01:54.75
David Koifman
Exactly imagine you have an opportunity to produce an order for somebody like target for the first time ever and so you’ve been selling your product on shopify through your own website and it’s taken off and the sales are increasing and every time you place an order with your. Manufacturers you’re paying a little bit more because the order quantitynt is increasing a little bit but now Target comes to you and they say hey I’m going to place an order that exceeds everything you’ve done in the last twelve months so all of a sudden you have to double your biggest previous order ever. How are you going to pay for that right? and some businesses actually have to say no to those opportunities. Because they don’t have the cash available and so there’s a lot of different ways to access cash and I think we’ll be discussing that in more detail today inventory financing is the method that we’ve developed that intends to align most closely with the cash flows of this type of business.

02:47.48
Brandon Rollins
And that makes a lot of sense because it would be terrible to be in a company’s situation like that and say well we’re five hundred bucks short we cannot produce this massive run for target that’s no fun for anybody not for the business certainly not even for Target. Um, but you had mentioned ah just a second ago inventory financing. So for those who are unfamiliar with the concept. Can you explain how that works.

03:12.70
David Koifman
Inventory financing is not ah, a new concept. It’s been around for I would say over 100 years and it’s been tackled from a number of different angles. Um, it’s interesting because. Inventory is the collateral in all of the deals that do inventory financing. We operate a unique agreement based on consignment where we’re actually purchasing inventory on behalf of the business and then they’re selling it on our behalf on consignment. Which is it’s kind of like if you think of a consignment store where you bring them a couch and then they sell it for you and then you take in the proceeds minus their fee. That’s how our deals work. So.

03:49.69
Brandon Rollins
Um, a.

03:56.27
David Koifman
Inventory is collateral. You know as opposed to other financing methods where you have like your entire business as collateral for say a bank loan or a line of credit or for say accounts receivable financing where the accounts receivable is the collateral. And that would be actually applicable in our previous target example where target place is in order. Let’s say for a 100000 worth of goods you deliver those goods to them and then they say cool. Thanks, we’ll pay you in sixty days and a an accounts receiveable financing program at that point would say all right. They’re gonna pay you a hundred k in sixty days how about we’ll pay you ninety now and then we’ll get paid by then sixty days from now we’ll take our fee and then we’ll give you the balance. So. That’s that’s how accounts receivable financing works and that’s been around for for ages. The difference now is that so many businesses are selling through marketplaces and through their ecommerce website and you have no accounts received wool because you’re not delivering a big order to somebody who’s paying you at a later point in time.

04:54.21
Brandon Rollins
Um, a.

05:06.95
David Koifman
So you have these multiple channels for delivering product to customers and they all have different terms like if you sell up 1 widget on your website. You’re getting paid for it instantaneously some some buyers buy on 10 day terms some buyers buy on 30 day terms some buyers buy on 60 day terms.

05:24.00
Brandon Rollins
Is it.

05:26.27
David Koifman
The funny thing is those buyers are actually financing their own inventory by giving the terms to begin with right because they don’t have the cash to be paying everybody upfront for stuff what they’re doing is they’re taking the stuff they’re selling it. They’re turning it into cash and then they’re buying it from you. Right? So That’s kind of their their own little version internal version of and inventory financing that just is an industry standard for all big retail.

05:52.52
Brandon Rollins
And you’re just kind of opening that up to a larger E-commerce market.

05:57.89
David Koifman
Yeah, we’re we’re trying to target Multi-channel or any individual channel and and sort of giving them the same treatment but hyper focused on solving their unique problem or their combination of channels.

06:01.81
Brandon Rollins
And.

06:15.78
David Koifman
As a whole.

06:15.89
Brandon Rollins
Now How does this compare in terms of advantages and disadvantages to something more like what’s the word I’m looking for like business loans or credit lines.

06:28.45
David Koifman
It depends on who the provider is I would say you know I’m trying to be educational here. So I’m not just going to say take further is the best for everything um a bank will give a line of credit. Or a small business loan that will be the lowest rate you can access outside of friends and family. That’s your number 1 choice the problem with that is that often. They decline businesses that are in high early stage growth because they’re looking for a longer track record or they’ll provide a limit that. Is nowhere near what you’re looking for so we look at it as part of the capital stack and so you have a number of different places where you get your money. One of them might be your own personal bank account. You know you, you might be looking at line of credit or a loan from a bank. Um, you might be looking at. Raising an equity round to bring cash into the business inventory financing is something to definitely consider as part of that Nix then you have revenue financing you have accounts receable financing purchase order financing. These are all different programs different products to look at.

07:39.20
Brandon Rollins
Now that makes sense now because the banks generally they’re going to be ones looking for just something that’s been around for a while. That’s that’s kind of how they like to roll they like to minimize their risk. Um, but I’m assuming that you probably still have some qualifications in place that kick further requires Before. You’re able to provide inventory financing is that is that fair to say.

08:00.37
David Koifman
Yeah, it’s it’s funny. The name kickrither came from like ah essentially a playoff of kickstarter. So kickstarter is the first production run right? You have a great idea. You’ve developed a prototype and.

08:06.94
Brandon Rollins
Are.

08:15.10
David Koifman
You’ve contacted a manufacturer about producing your first major production run and now you go to kickstarter to finance your first production run where a community of participants who is interested in buying the product is also financing their own unit of products and so you gather that money together. Pay your manufacturer and then you’ll fulfill the order to all the customers now what happens next you want to make another run and you want to start selling it on Amazon how are you going to pay for that production run because each customer isn’t always willing to wait a year for their one widget to arrive.

08:41.27
Brandon Rollins
Is in.

08:53.38
David Koifman
So that’s kind of the genesis of the platform is what happens next and the idea is you’ve worked out the kinks you’ve produced your stuff once or a handful of times and demonstrated your ability to manufacture quality control sell deliver product take in revenues. And run your business and so for that reason we require four hundred k in trailing twelve months sales in order to qualify for inventory financing with kick further.

09:22.28
Brandon Rollins
Okay, yeah, that makes sense. Um, can you also help by let me let me let you do this one again. That’s a beauty of editing isn’t it. Um, yeah, that makes a lot of sense so far.

09:30.48
David Koifman
Soon.

09:37.30
Brandon Rollins
So kind of on my related note can you break down the costs that are associated with inventory financing.

09:41.47
David Koifman
We look at it on a cost per and month basis. So essentially you are looking at the amount of time between when you need to pay your manufacturers and when you expect the cash to start coming back in.

09:45.30
Brandon Rollins
See.

09:57.69
David Koifman
Ah, from the sales of that particular inventory run. That’s when you start making payments and then once you’ve seen 80 to 100% of the cash come in from those sales. That’s when you expect to stop making payments. So every deal has a unique duration based on your projections as a business owner.

10:00.47
Brandon Rollins
It.

10:16.22
David Koifman
Um, and the total duration multiplied by the rate per month is what your cost is going to be and I would say as a rough estimate one to two and a half percent a month is sort of the range and where you fall within that range is based on the risk of your business. We look at data.

10:26.31
Brandon Rollins
And.

10:34.99
David Koifman
That comes from bank accounts accounting platform and sales platform.

10:40.72
Brandon Rollins
Now Let’s say somebody does it secure inventory financing. How is that going to affect their cash flow in their working capital.

10:51.53
David Koifman
The idea is to streamline the cash flow right? So you you want you don’t want to have lumpiness in your cash flow where all your money is coming in when you sell the product and the rest of the time you’re just spending here. You’re getting access to money to buy product.

10:54.46
Brandon Rollins
Me.

11:10.10
David Koifman
Before you actually sell the product. It’s also freeing up cash for whatever other needs. The business has. For example, if you need to spend on equipment or marketing or.

11:24.57
Brandon Rollins
No.

11:26.62
David Koifman
Some sort of R and D this sort of smooths out your cash flows so you have access to capital more frequently than just when your product is selling.

11:33.23
Brandon Rollins
That makes perfect sense. So have you observed any trends or shifts and demand for inventory financing in the last five years particularly because ecommerce has changed so much.

11:48.99
David Koifman
Yeah I mean 5 years is ah is a big period in time and I’ve actually been with kick further that entire time. Um, it’s interesting. How things have changed with the relationship with China and also the pandemic. It’s it’s really just driven businesses.

11:50.32
Brandon Rollins
You.

12:05.23
David Koifman
To want to buy more less frequently. So they’re placing bigger orders maybe instead of 4 times a year three times a year or twice a year and there’s a couple things that they’re they’re essentially trying to address risk and costs so risk.

12:09.52
Brandon Rollins
Um, even.

12:14.53
Brandon Rollins
Is it.

12:24.34
David Koifman
Comes in some sort of delays in fulfillment or logistics where you know they experience that containers were sitting in port for a while or waiting to go out to sea and they were unable to get their inventory on time. So ah, and especially when you have multiple orders that are sort of. Staggered throughout that delay process. It becomes even more painful. So it’s important to get larger quantities of inventory in-house so you can be more resilient to those sort of events and the other thing is if you place bigger orders. Then one you can save on logistics costs so you can maybe fill a container or have multiple containers and 2 probably most importantly, you can get discounts from your manufacturer because you’re placing larger orders and so that’s really the best way to drive down costs and a third thing is. A lot of people will get terms from their manufacturers and essentially that means the manufacturer is offering them some sort of inventory financing and most of them are not in the business of finance and do this just so they can close more deals. So if you bring them an opportunity to maybe reduce their margin a little bit but not deal with having.

13:23.49
Brandon Rollins
Is it.

13:30.37
Brandon Rollins
Um, yeah.

13:36.44
David Koifman
Ah, payments do after you sell your inventory or after you receive it. They would definitely offer you Not definitely start that one over.

13:42.37
Brandon Rollins
Um, if.

13:49.73
David Koifman
They are often likely to offer you a discount in favor of the terms that they’re currently offering you.

13:52.46
Brandon Rollins
And that just makes a lot of sense because if you do financing on a regular basis. You have a pretty good idea of like when you’re going to get paid Back. You get a you you get a good sense of that I imagine after a while manufacturer they just specialize in manufacturing. Like sure they they know what they’re doing with billing but um, they might charge a higher percentage than your rates just for being able to send that stuff out in advance and have it on Net thirty Net Sixty Net ninety or whatever they need to do just convince people to buy the bigger loan.

14:23.70
David Koifman
They would need to because they’re almost certainly less sophisticated and evaluating business risk so they need to cover their losses more conservatively.

14:30.93
Brandon Rollins
Um, you know.

14:37.46
Brandon Rollins
That makes a lot of sense. Um, so with that in mind where can people learn more about kick further link in the description.

14:44.93
David Koifman
Kickferther.com is a great place also feel free to email me directly David at Kickfrither.com and our our team is great at answering questions. You know, many businesses do come to us a little bit before they’re qualified. We’re happy to be a resource. Ah, we have a number of partnerships that may help businesses grow faster and also can give you guidance for when you are ready to engage with us. Um, that’s it for that question.

15:07.54
Brandon Rollins
The.

15:15.38
Brandon Rollins
Yeah, absolutely and also in addition to that I’m going to include the kick further social media down below so you can also check that out if you would like to follow kick further on well on whichever channels you’re on all right? Well thank you very much for your time.

15:28.60
David Koifman
Cool.

15:34.13
Brandon Rollins
We really appreciate it all right.

15:34.37
David Koifman
Thanks Brandon that was a great chat.

Final Thoughts

Thanks for watching this interview. I appreciate it and I know David at Kickfurther does too!

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