Inventory financing allows businesses to use inventory as security to obtain a revolving line of credit. Inventory financing is useful for companies that pay their suppliers for a shorter period. Also, it helps businesses to sell their inventory to the customers. You can use the line of credit to purchase additional inventory. Besides, it will help a business get through seasonal fluctuations in cash flow. In other words, Inventory Finance is a credit facility backed by the inventory of a business. Your company receives the funding by submitting a draw request to the lender, who deposits the funds in your bank account. Once you have the funds, you can use them for any business expense. Transactions regularly settle as inventory is turned into a product and sold to the customers.
What are The Benefits of Inventory Financing:
Availability of Additional Liquid Cash:
Any startup company would agree on to make more money. Meeting day to day necessary expenses can become a challenge at times. Often there is a gap between the collections and cash requirements. Inventory Financing allows the business to leverage their stock/inventory. It unlocks the value tied up in the stocks of finished goods. Additional liquid cash improves the company’s cash flow. Your stock of goods can help you get quick and shorter period of loans.
Availability of More Resources To Focus On Core Business:
Inventory financing allows the business not to touch other resources of finance. In turn, Business leaves other resources for more critical use. It will enable the business to have more time and resources to focus on core business.
Leverage to Place Big Orders:
As a business owner, you can use your inventory for finances. Inventory Financing will help business owners to place bulk orders. The benefit of having cash flow will create an opportunity to negotiate significant discounts from the supplier. Putting bulk orders also allows you to enjoy lower shipping and transportation costs.
Working capital will boosts sales and will help in expanding the business. You are more confident, inclined to purchase large quantities which enables you to have sufficient stock at all times. The business is capable to supply unexpected high demands.
Easy Process With Quick Money:
The process of getting inventory finance is more straightforward as compared to other conventional financings. Inventory Financing is a type of funding that does not get mentioned in the company’s credit report. The borrowed amount will not affect the company’s debt-to-income ratio. This requires little paperwork, and it costs less.
Also, ‘Inventory Financing’ usually takes place over the short term. Thus, the expectation for payment of a loan in full is within a year. If inventory financing works well for the business owner, it can often be issued as a revolving line of credit. However, business owners should always consider the risks. It is essential to evaluate the benefits of inventory financing against the threats to determine its feasibility.
Inventory financing can be particularly helpful for new ventures and startups. They can materialize on having access to easy working capital and operating cash.