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Inventory finance

Empowering Your Financial Future with Trust and Expertise.

Inventory finance is a specialized form of short-term funding, short-term loan or revolving line of credit that businesses use to purchase inventory (raw materials, finished goods, or components) they intend to sell later & before they generate sales revenue. It bridges cash flow gaps, allowing companies to stock up without depleting working capital.

Unlike many of the other trade-related funding solutions, the inventory being purchased generally serves as collateral & security for the loan.

Why Inventry Finance

Key Features:

Usage: Helps businesses buy stock without immediate cash outlay or needing to implement additional financial instruments as security for the loan.

Collateral: The purchased inventory generally secures the loan.

Users: Common among small to medium-sized businesses, especially those with seasonal sales fluctuations or limited access to traditional financing.

Benefits:

Better management of cash & working capital & assists by not tying up capital in unsold goods.

Allows for growth by enabling businesses to meet demand spikes such as seasonal fluctuations.

Supporting growth, allowing larger inventory purchases or take advantage of bulk order discounts, although this must be weighed against the risk of overstocking & interest costs.

When assessing a company applying for Inventory finance, a lender will have certain criteria be met prior to approving the loan. Some of the things to be considered include

Sales History: Proven demand for your inventory.

Inventory Quality: Sellable, non-perishable goods (e.g., not obsolete tech).

Collateral: Inventory itself often secures the loan.

Financial Health: Stable cash flow or purchase orders from reliable buyers.

Key aspects of inventory finance:

  • Collateral: The inventory itself serves as collateral for the loan
  • Flexibility: Particularly useful where a company is subject to seasonal fluctuations in demand & cash flow and assists to maintain stock levels.
  • Accessibility: Is often used by smaller businesses where they may not have access to other financing options. How Inventory Finance typically works:
  • The importer applies for inventory financing, providing details about the inventory to be purchased and the company’s financial health.
  • Inventory & Collateral Assessment: The lender evaluates & values the inventory to determine its value and the loan amount that can be secured against it.
  • Loan Agreement: If approved, a loan agreement is drawn up, detailing items such as the inventory, the terms, interest rates, and repayment schedules.
  • Funding: The importer receives the funds, which can be used to purchase additional inventory or manage cash flow. Alternatively the funder will pay the outstanding balance on the inventory after deposit payments are made
  • Inventory Monitoring: The lender can request to periodically check the inventory to ensure it remains sufficient to cover the loan.

What is the difference between Asset & Inventory Finance

FeatureInventory FinanceAsset Finance
Type of AssetGoods for resaleOperational equipment or vehicles
Loan DurationShort-termMedium to long-term
CollateralInventoryFinanced asset or existing assets
Business GoalBoost sales and manage stockImprove operations and productivity