Inventory Financing
How It Works —
Businesses are able to access financing based on a % of the inventory that the company has. As inventory fluctuates up and down, the available capital does too. You can choose the amount you would like to borrow, pay it back at any time and only pay interest on the borrowed amount.
Example —
The line of credit is based on 40% of a company’s inventory. The company has access to $400k in funding based on $1M in the current inventory balance. The company only borrows and pays interest on $100k.
You Might Be A Fit If —
- Your company has strong inventory management and sales performance.
- Your inventory has good resale value.
- Your inventory is in your possession or you have unlimited access to it.
Why You Would Use This —
You need to purchase more inventory in preparation for expected increases in sales.
Your inventory vendors require payment before you are able to sell enough inventory to cover the cost.
You have limited assets or business history but high quality and value of inventory.
You can manage the financing costs by choosing how much you want to borrow and payback.
What TO WATCH OUT FOR —
Some lenders will require an audit or exam by a third-party to properly understand the value of the inventory.
Many times these audits can be done virtually to reduce costs.
The kinds of inventory that you have will influence the amount that you can borrow.
Raw materials and/or finished goods are most attractive to lenders because they don’t require additional development or brand to be resold.
In-transit inventory is typically excluded from inventory that is eligible.
Having the right shipping insurance can make in-transit inventory eligible.
There might be a fee that you pay based on the amount that you are not borrowing.
Calculate any unused line fees to make sure you aren’t paying a high cost if you don’t plan to use the funds often.
