Managing inventory is a key challenge for many businesses, particularly those organisations in retail and manufacturing. Having adequate stock to meet customer demand without tying up too much cash is a delicate balance. Many businesses turn to inventory financing to help resolve these issues.
What is Inventory Finance?
Inventory finance is a type of funding that allows businesses to purchase stock without using too much of their working capital, meaning your business can maintain positive cash flow while ensuring you have the necessary stock to meet customer demand.
Types of Inventory Finance
Inventory Loans
A short term loan where the stock itself serves as collateral for the loan. Lenders assess the value of the inventory and offer a loan based on a percentage of that value.
This type of funding is ideal for businesses needing to purchase large quantities of stock ahead of seasonal demand.
Rolling Credit Facilities
A revolving credit facility provides your business access to a pre-approved credit limit that you can draw from as and when required.
This option provides flexibility for managing ongoing inventory needs without committing to a fixed loan amount.
Trade Finance
Trade finance helps your business purchase inventory from suppliers, by providing funding to cover the upfront costs: easing cash flow constraints and ensuring you hold on to much needed working capital.
Asset-based lending
This type of funding allows your business to use your existing inventory as collateral to secure a loan.
This is particularly useful if your business holds high-value inventory; when you’re looking to unlock working capital.
Benefits of Inventory Finance
- Improved cash flow: Invest in growth by purchasing more inventory, without depleting your cash reserves
- Increased purchasing power: Buy in bulk by accessing discounted rates, without the financial strain of using a large proportion of your working capital.
- Improved Flexibility: Many inventory finance products can be tailored to suit your business needs, giving you the ability to mold the repayment structure to fit your seasonal demand.
- Facilitate and support your business growth: Ensures you have sufficient stock levels to meet customer demand, and leveraging external funding to expand your operations.
Is Inventory Finance Right For Your Business?
If your business experiences cash flow shortages due to large investment into stock purchases, inventory finance can be a sensible solution. Inventory finance is particularly useful for businesses with seasonal demand, where you depend on your supply chain efficiency, and can help to facilitate ambitious growth plans where you leverage your inventory to access additional funding.
To explore your inventory finance options, get in touch with an experienced broker at Mill Wood Finance who can source a tailored funding solution to suit your business’ unique requirements.
