What should an entrepreneur do if their working capital is tied up in goods in transit inventory coming from overseas?
Financing goods in transit or in-transit inventory with WIP Funding turn inventory into working capital once the quality goods leave China or other overseas sources or ports.
If you are on a borrowing base, many times lenders specifically exclude In Transit Inventory from availability because they lack supply chain financing expertise. As a transaction-driven funder, factoring companies look at the creditworthiness and return policies of your end customer. They will only fund the pre-sold product. Also ensure that it is an actual sale, not consignment or with an unbridled return policy. Factors also need to confirm enough gross margin. Doing so will ensure you can succeed, and our monies are not at risk. Also, Credit Protection via credit insurance is typically utilized to mitigate risk.
Factors can utilize Letters of Credit, Cash Against Documents Funding, or a Vendor Guarantee to induce your supplier to release the goods. Each funding vehicle has its plusses and minuses which your funding representative would be happy to discuss. Most importantly: WIP Funding Finances Your Growth Opportunities!