Manufacturing, retail, or even dealership businesses have inventory as their backbone. Things don’t go that smoothly in lean sales periods and can leave a lot of your capital getting stuck in your inventory. This leads to your funds running low and it becomes tough for you to meet other needs of the business. Such situations call for inventory financing that helps you to meet your short-term payment needs and obligations.
This is a short-termed secured loan that can be availed of against any inventory or any stock that is with you. Your current value of stocks is going to help sanction your loan. This stock is going to serve as the collateral for your financing. This type of loan is the best way for your business to come out of sudden cash crunches.
How does it work?
This is a simple asset-based credit line that financial institutions offer you. You can get this loan by pledging them your inventory as collateral. The sales value of your inventory will then be evaluated to offer a percentage of funding and help create a repayment schedule. If the loan is paid back in time and in full, you will be getting back your inventory to sell forward. The specifications of the money lent and the repayment vary from lender to lender. The maximum value you can get is 90% of the inventory market value. Also, the value of the loan you are receiving depends heavily upon the industry you are functioning in, credit history, inventory value, and your financial situation.
What are the advantages?
- You can free up cash that is locked in your inventory. You do not need to compromise on its pricing.
- If you are a seasonal business, an inventory business is going to give you a boom in business.
- You are not restricted to use your funds.
- You are still eligible for inventory financing even if a traditional loan has been rejected.
How would you apply for one?
Meeting certain criteria would help you qualify and acquire the loan. The criteria are like:
- Your business must be operational
- Your business must have high value with tangible inventory and proper records
- Your business must have sales records for the last six months
- Your business must be operational for a year
- Your business must have a good credit score
Meeting the above requirements will help you get eligible for the Accord Financial retail inventory financing and you can acquire that easily.