Inventory loans, or Inventory Loan Financing, are lines of credit or a short-term loan designed to assist small business owners in purchasing inventory. An Inventory Loan Financing can also be structured where the Inventory funding source buys the inventory for you. Traditional banks can take a long time to fulfill current inventory needs or have a high turndown rate. Hence, Non-Bank Inventory Financing is an Asset Based Loan, which is based on a Company’s convertible inventory to receivables or their saleable inventory assets.
Inventory lending is mostly for product-oriented businesses. The lenders like WIP funding and others are interested in the businesses’ sales performance record and purchase orders from creditworthy customers. If your company has a history of strong sales, then the inventory line of credit is a sensible choice.
At WIP funding, we understand that obtaining inventory is crucial to fulfilling purchase orders. Unless you have finances to acquire inventory, you will not be able to process requests. Also, it can risk losing current clients. No company would want that to happen. To fill in the Purchase order needs, many business owners opt for different solutions. Sometimes, they sell their equity, which may not be a wise decision, but they might feel that it’s the only choice left. However, different kinds of loans, financial tools and a range of different lenders are available for inventory financing needs.
An Inventory Loan can meet your Working Capital or Product Inventory needs:
- Inventory Loan financing helps if you are in a seasonal business. You can obtain this loan to purchase the required inventory. Also, to repay the loan in short turnaround time with the proceeds of the seasonal sale from your accounts receivable.
- There are times when you realize that having inventory on hand can prove to be beneficial. As and when you have customers, you can fulfill their orders quickly and attract them to be repeat customers. In a quick turnaround time, inventory lines of credit can provide you with the required funds.
- The most apparent benefit of Inventory Loan or inventory financing is that you can have your storerooms and display units stocked at all times. It will ensure that your customer never returns frustrated due to lack of availability. You can always be stocked and ready for potential customers.
- Even wholesale retailers can make use of a tangible inventory lending facility to refill their supply.
- This type of financing is also useful when your business faces the challenge of making payments to the supplier in a short time. The production cycle starts with the procurement of raw material from suppliers, then processing it through the manufacturing process and finally giving the output for sales, which provides cash flow to make payments. If the manufacturing process is lengthy, then you can face the challenge of making payments to the suppliers. This, in turn, would adversely affect the inventory management team. Inventory Loan or Inventory Financing would come very handy in this situation.
- With inventory, loan business can do bulk purchasing and save on some purchasing cost. You can purchase at a reduced price by placing large orders. This has a positive impact on your profit margins and your bottom line.
To increase your odds of obtaining Inventory Loan:
- Make sure your inventory management system and financial reporting are easy to follow, organize, and accurate.
- Ensure the security measures to prevent your inventory from any damage. You cannot afford to let any of your high priced inventory go to waste. Place secure checkpoints to avoid any damage in the warehouse, storehouse due to temperature control measure.
- Prepare your workspace, inventory space, your employees and yourself for a visit from the lender.
- Maintain flawless sales record and have it prepared in an easy to read format.
- Calculate and plan the requirement for enough inventories carefully. You are opting for an inventory loan to ensure you are not short of required inventories. However, at no point in time do you want “dead” inventory.
- Update and prepare a thorough business plan that matches your real numbers.
Lending companies like us (WIP funding) are an excellent source of inventory-based lending if your loan request has been turned down by the traditional banks. Our team of experts at WIP funding are familiar with all the different types of inventory finance. We also take pride in the fact that we have funded in almost every industry. When the supplier receives payment, you will be equipped to run your business smoothly. Our experience has proved that Inventory Loan Financing is an advantage to all parties involved. We hope to be your choice of financing tool in your times of need. WIP funding understands that time is of the essence to get your inventory financing in place so you can fulfill big orders.
To summarize, you can use your inventory as collateral for funding.
Inventory loan is available in two ways:
- A Non-Bank Inventory Financing company like WIP Funding will buy the needed inventory for your company based on purchase orders from creditworthy customers. This type of Inventory financing is a transaction, and customer credit has driven.
- As a revolving inventory line of credit uses 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.