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Understanding Inventory Finance

Cash flow is one of the principal concerns that new businesses face.When your business has to maintain a specific amount of inventory to ensure smooth transactions, it is imperative that the cash flows are smooth. In such circumstances, relying on conventional financing may be dicey since they are time consuming, which may result in inventory deficits, ultimately leading to loss of business. To help solve such issues, lending institutions have come with innovative financing tools and Inventory Finance is one such tool. This tool helps businesses to maintain adequate stocks so as to ensure smooth flow everyday business operations.

The best part of Inventory finance is that the stock to be financed does not need to be pre-sold. In other words, to get inventory financing for a stock, the stock does not need to be already delivered or billed for by the customer. This helps businesses especially distributors, dealers and manufacturers to maintain sufficient stock without straining the cash flows. One more advantage of inventory finance is that it makes the finance available right from the initial phases of the selling process. This is much more convenient and useful than some of the other financing tools, like invoice financing, that offer such facilities only at the end point of the process.

Inventory finance is suited for manufacturing, wholesale, distribution and reselling businesses. It is also appropriate for businesses that have good inventory turnover with persistent need for steady cash flows to replenish and maintain inventory. Inventory financing is usually available for a wide range of businesses and for inventories of different kinds including raw materials, semi- processed and finished goods.

In addition to the procedural advantages of inventory finance the benefits are also numerous, including:

• Inventory finance helps you acquire stocks without any deposits and covers all costs including Goods & Services Tax (GST)

• Your working capital is so much more strengthened since inventory finance allows you to acquire stocks and make payments on time without hampering the cash flow of your business.

• With inventory finance you can give wings to those expansion plans without compromising your businesses financial health and without losing out on any opportunity to expand your customer base that comes your way.

• Inventory finance also enhances your purchasing power and consequently gets you bulk discounts from the suppliers. This can also help you avail special offers that suppliers float from time to time.

• You can get that extra stock during peak seasons and ensure that you do not lose out on any customer due to stock outs.

• With the ability to buy in bulk and higher volumes, you can negotiate a better deal and lower your freight costs through volume orders and early payments.

• Inventory finance would require no real estate security and neither will it count against your credit line.

To sum it up, inventory finance is a convenient and appropriate solution to all your inventory and cash flow worries.

About Author Stephen Hine :

Stephen Hine is a leading expert on Business Finance and has been providing commercial funding solutions to businesses for over a decade. He has helped hundreds of companies overcome their funding hurdles from small business lending requirements to complex multimillion dollar transactions, sourcing funds from both traditional and non conventional sources. <a href="" target="_blank"></a>

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Article Added on Friday, June 7, 2013
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