A new trend is completely changing how businesses are securing the finances necessary to meet their business needs. This trend offers businesses an excellent alternative financing source.
It is known as peer-to-peer (P2P) financing, and it is quickly gaining momentum.
It sounds pretty straight forward and you would imagine that securing the necessary would be easy.
Well that wasn’t the case for InventoryClub founder Terry Igharoro, who still found it challenging to access the necessary finance to stock his online hair business.
He believed there had to be a better and easier way to access finance, so he started exploring various financing models until he came up with the idea to create a P2P inventory financing system that lowers the barrier to entry for merchants wanting to sell online.
Businesses aren’t the only ones who benefit however. P2P financing also offers everyday individuals with a new, unique, and exciting opportunity to be a financial backer to businesses and realise lucrative returns, both short and long term.
We are a P2P inventory financing system that enable online merchants to access inventory without the need to go through financial institutions.
All while providing everyday aspiring financiers the opportunity to jump in and play a game normally reserved for the financial elite.
But how does this all work?
Glad you asked.
What Is P2P Inventory Financing
To understand what P2P inventory financing is, let’s first gain clarity on what P2P financing is in general. P2P financing essentially offers a personal financing platform where one person (or business) can obtain financing from their peers.
It is usually done in a secure environment that connects those who in need of financing with those who are willing to lend money.
Many online (e-commerce) businesses face two substantial challenges:
- Lack of financial resources, making it difficult to access inventory at volume for discount prices
- Difficulty getting financing from traditional lenders as a start-up or SME business hoping to grow a successful online store
Therefore, it is pretty easy to see how beneficial P2P financing can be to an e-commerce business looking to meet the inventory needs necessary to for growth.
Our goal is to help e-commerce merchants meet this need by providing you the ability to become their P2P inventory financier, meeting their inventory needs and building you a portfolio of high-yielding returns.
How It Works
In order for P2P inventory financing to work, there needs to be a certain level of trust and safety. You may think this trust and safety needs to be established between both parties (you and the e-commerce merchant) on an individual level.
Afterall, you’ve got to know who you’re in business with, right? Well, sort of.
In the InventoryClub ecosystem, the thing that affords trust and safety is our P2P financing system. We do perform a know your customer (KYC) check on the supplier to ensure they are a reputable source selling authentic products.
Things like the Inventory Finance Agreement (IFA) and InventoryTrace, amongst others things, will carry that heavy burden of trust and safety for you.
To better understand how the IFA smart contract helps secure P2P inventory financing, it is essential to start from the top. Once you have registered your member account you will have access to the marketplace, where you will find various inventory proposals available for purchase.
The proposals list all the essential information ranging from purchase price, retail price, merchant profit, member (your) profit and sales timeframe.
The smart contract (i.e. trust and safety facilitator) comes into play when you find a proposal for inventory that you want to purchase.
The IFA is a blockchain based computer protocol (smart contract) designed to facilitate, verify, or enforce the performance of a contract between you and the merchant once a proposal has been purchased.
It also states that all the inventory that is purchased remains as the member’s property until it is sold.
Every time a sale is made, the contract intelligently executes several commands to send notifications, update records, ship sold inventory, and pay out member and merchant profits.
We use IFAs in all deals between members and merchants in a hassle-free and transparent way. Both the terms and penalties are programmed into the IFA and are then executed automatically every time a trigger event takes place, like the sale of inventory items, and also when members buy a proposal.
Once created, the rules governing the IFA can’t be altered.
What makes this process robust is that once an IFA is created, its rules cannot be changed by the member or merchant. Not even InventoryClub admin can change these rules as the records are stored on the blockchain network.
Let’s take a real-world example to be able to appreciate better how the IFA governs the agreement between an member and a merchant seeking inventory financing.
Phil is looking to diversify his earning and is interested in P2P lending. He registers for a member account at InventoryClub and then purchases a proposal using VNT tokens. At this point, an IFA is created between Phil and the merchant.
After finalizing the payments and the programmable IFA being in place, InventoryClub purchases the inventory directly from the supplier on the member’s behalf, stores it in one of its secure smart warehouses and logs the details into InventoryTrace.
The transaction is recorded in the InventoryTrace system to transparently show that Phil’s funds have been used to purchase inventory.
The merchant is now able to sell the inventory Phil has financed, generating a profit and payment back to Phil’s account for every item sold.
With the ability to track the precise location of all inventory that a member has purchased as well as validate where it is in the sales cycle, smart contracts afford better security and transparency for P2P inventory financing.
And because all marketplace transactions within InventoryClub are recorded in a robust ledger that is stored on the blockchain network, you can be confident that InventoryClub provides you with a secure and transparent marketplace to conduct your business endeavors and reach your financial return goals.
Interested in learning more about how InventoryClub can help you take advantage of the tremendous financial opportunity that is happening right now in the Commonwealth? Check out our whitepaper.