Inventory financing enables businesses to use inventory as security to obtain a circulating line of credit. Inventory financing is beneficial 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 company get through seasonal changes in cash flow.
Inventory Finance is a credit facility backed by the inventory of a business. Your company receives funding by presenting a draw request to the lender, who deposits the funds in your bank account. Once you have the funds, you can utilize them for any business expense. Transactions regularly settle as inventory is converted 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 a 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 important use. It will allow the company 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 meaningful 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, allowing you to have sufficient stock at all times. The company is capable of fulfilling 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, you can get it 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 secure working capital and operating cash.