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Non-Bank Inventory Financing is an Asset Based Loan based on a Company’s Convertible Inventory to Receivables or their Saleable Inventory Assets for one of many Inventory Based Financing Solutions
A business can use its inventory as collateral for funding or get a business inventory loan.
When researching lenders that fund inventory, the funds via borrowing are typically available one of two ways:
- A Non-Bank Inventory Financing company will buy the needed inventory for your company based on purchase orders from creditworthy customers. Non-bank Inventory Financing is transaction and customer credit driven. Some of the inventory that factors purchase are garments, footwear, apparel, furniture, and other types of consumer goods. You can also consider this as off-balance sheet responsibilities or liabilities if we take title to the products. Factors tend to make a Purchase Order specific inventory loan and expect their position to be taken out by a receivable financing lender or invoice factoring company who will be factoring receivables. As an alternative lender, a factor’s process steps will be much faster than a conventional bank or one offering SBA loans.
- As a revolving inventory line of credit uses the inventory that can assist a business to purchase products and materials through cash flow dips. The credit line is specifically for capital to buy inventory that is needed to create additional products for sale to the business’s customers. A loan inventory can be more robust for a borrower to obtain from alternative lenders versus accounts receivable financing or revolving credit based on your AR. Also, it is much less expensive than a merchant cash advance.
Factors know that a company cannot stop processing orders, or they risk losing clients. The results can be catastrophic if you cannot obtain inventory or have the monies for inventory purchases when a company has purchase orders, those PO’s need to be filled. However, most entrepreneurs and their startup companies don’t have information on the different types of financing — also, strong financials to meet lender qualifications.
Business owners may end up selling equity in their company to fill PO’s. New business owners need to recognize is that they have alternatives from different loans and lenders. Often if they can get the product from their wholesalers or dealer, they can quickly create a solid receivable from creditworthy retailers. Many options for Purchase Order Financing and inventory-based lending are available.
Some startups are given opportunities through marketing at trade shows, or even a feature on a talk show. Once they get exposure, the small business experiences a surge of orders. Sometimes startups are making products out of their garages, or they don’t have their manufacturing solution. When business owners start thinking of selling off parts of their company and investors can take advantage, killing a small business very quickly. Also, startups don’t have strong financials or enough account receivables to go to a traditional lender for a business loan inventory.
If a business has valuable inventory, they may be eligible for inventory finance. Meaning, there’s no need for a business owner to try and get financing from a bank that might deny the business loan or sell ownership in the business. With an inventory finance solution, you can fulfill all orders, and the company can continue to grow.
Inventory finance is preferable for many companies because it’s a short-term loan. The loan is for that business to purchase materials and products for sale. Inventory finance comes in handy when the company has to pay its supplier right away. Perhaps the manufacturing process takes an overly long time.
It may also be possible that the business cannot sell the item in time to pay the supplier. Inventory financing is a perfect solution for this common problem. It’s also good to show an inventory lender that you have proper inventory management systems in place with a handle on your inventory turnover. This is important to asset-based lenders and those making asset-based loans in general.
Another instance where inventory financing is a great solution is when a business needs to stock up on additional inventory for a specific season. Perhaps the company sells four times the amount of merchandise to retail during the seasonal Christmas holiday. It’s unrealistic for some businesses to have the free cash flow to support such a large order of materials. Instead of a company rejecting requests and risking lost sales, they can choose inventory finance from a lender who understands seasonal and other flexible financial solutions. Also, replenish from suppliers or distributors and have the right amount of product on hand to sell during that time.
When a company outsources the manufacturing for private labels, the more that business can buy; often the better deal they get on the price. Companies use inventory loans to be able to place larger orders. They also need it to purchase inventory at a lesser amount from vendor creditors. The business is going to make more money for each item they sell. Also, they have more massive profits to follow.
WIP Funding has deep experience in company inventory financing and inventory loans. When strong balance sheet based traditional lenders, SBA lenders, or traditional banks, underwriting doesn’t offer business credit based on current assets. WIP Funding is there with a financial solution. Not only are we familiar with different types of inventory finance, but we also provide funding in almost every industry.
WIP Funding will make sure the supplier gets the payment, and the business continues to run smoothly. It is an asset to all parties involved and, most importantly, to meet the customer’s needs. We hope to be your critical financing tool in times of high inventory.