Inventory Financing: What To Know Before Applying?
Carrying along a large inventory base can sometimes prove disastrous for many small businesses. And this is why many of them prefer opting to secure their inventory financing. Inventory financing is a type of debt-based funding for businesses. It enables business owners to receive money from a lender that will help him buy more inventory that could be sold. Many well-established businesses fail at times due to uneven cash flows. In such cases, taking small inventory finances can smoothen the operation of the business. Here is listed everything you need to know before opting for inventory financing.
What is it?
The relatively simpler form of fund lending is mainly to enable businesses to acquire more inventory. Small and medium-sized businesses that do not have a steady cash flow opt for inventory financing, generally shortly spanned, to cover the cash flow gaps or pay off the debts. The approval of the finances is followed by a payment schedule sent by the lender which plans the repayment layout.
Is it Secured or Unsecured?
Inventory financing is termed as a self-secure loan where the inventory that is purchased using this amount forms the collateral of the loan itself. But the lenders can, however, consider it to be unsecured if the business is unable to sell-off its inventory.
How to Get Qualified for Financing?
The provision of collaterals is not enough for the business to qualify for inventory financing. There are other parameters too:
- The business needs to be product-based.
- The business must at least be a year old.
- The business must be able to meet the minimum requirements set by the lender.
- The business must be able to produce its detailed financial transaction history.
- The business must be able to bear the extra charges against the flexible time.
What are the Costings?
The costing varies from lender to lender. But again the reputation and the potential of the business will also determine the amount you need to pay for. But it is necessary to compare the annual percentage rates of various lenders before settling for one.
Advantages
- Boost in sales volume
- Product line expansion ability
- No personal asset needed for collateral
- Boost in manufacturing
- Lower issues of cash flow
Accord Financial retail inventory financing provide the solutions for all your cash flow issues in business growth. Opting for debt-based financing will ensure a good return on your investment and will help your business to flourish.
