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:
Inventory Financing Method One:
A Non-Bank Inventory Financing company like PO Funding will buy the needed inventory for your company based on purchase orders from creditworthy customers. This type of Inventory financing is transaction and customer credit driven.
Some of the inventory we will purchase are:
- Furniture and many other types of consumer goods.
This can also be treated as off-balance sheet obligations or liabilities if we take title to the goods.
We tend to make a Purchase Order specific inventory loan and expect our position to be taken out by a receivable financing lender or invoice factoring company who will be factoring receivables. As an alternative lender, our process steps will be much faster than a conventional bank or one offering SBA loans.
Inventory Financing Method Two:
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. A loan inventory can be tougher for a borrower to acquire from alternative lenders versus accounts receivable financing or revolving credit based on your AR but be much less costly than a merchant cash advance.
PO Funding knows 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. Most entrepreneurs and their startup companies don’t have information on the different types of financing and also strong financials to meet lender qualifications. Business owners may end up selling equity in their company just to fill PO’s.
Start-ups and Inventory Financing:
It is important for new business owners and start-ups to realize they have options from different loans and lenders. Many times 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.
If a startup business or a business opened for 20 years has valuable inventory, they may be eligible for inventory finance. This means there’s no need for a business owner to try and get financing from a bank that might deny the business loan or there’s no need to sell ownership in the business. With an inventory finance solution, orders will be fulfilled and the company can continue to grow.
More Benefits of Inventory Financing
Perhaps the manufacturing process takes an overly long time and the business cannot sell the item in time to pay the supplier. Inventory financing is a perfect solution to this common problem. It is also good to show an inventory lender that you have good 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 business sells 4 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. So instead of a business rejecting orders and risking lost sales, they can choose inventory finance from a lender who understands seasonal and other flexible financial solutions, 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 label, the more that business can buy, many times the better deal they get on the price. Companies use inventory loans to be able to place larger orders and purchase inventory at a reduced price from vendor creditors. The business is going to make more money for each item they sell and larger profits follow.
Why Choose Inventory Financing with Us?
PO Funding has deep experience in company inventory financing and inventory loans. When strong balance sheet based traditional lenders, SBA lenders or traditional banks underwriting won’t offer business credit based on current assets. PO Funding is there with a financial solution. Not only are we familiar with all the different types of inventory finance, but we have funded in almost every industry. PO Funding will make sure the supplier get the payment and business continue running smoothly. It is an asset to all parties involved and most importantly to meeting the customer’s needs. We hope to be your critical financing tool in times of high inventory.