Staying on right side of the financial lane is a crucial aspect of business. During dry times, a business will need extra capital to keep the shelves stocked with inventory for the next buying season. Inventory loans, otherwise known as financial loans, can give extra support to businesses during slow periods and prepare it for the next expected product or service surge. An inventory loan is basically a short-term loan designed to help a business acquire enough inventory for sale. The inventory serves as collateral if the business fails to honor its loan payment.
Getting the right inventory loan for a business is a function of the business’s scale and goals. The business must have a solid plan and achievable vision before it can decide on the type of inventory loan it should apply for. Certain requirements must be considered before applying. The appropriate inventory loan can be identified based on the business’s previous performance. For example, if a business’s demand for inventory exceeds its supply, then the business should consider getting an inventory loan that will enable it to acquire the goods it needs to meet the demand. On the other hand, if there is a slow or low turnover of inventory, then it is not advisable to apply for an inventory loan.
Eligibility for an inventory loan varies with lenders, but the general and most important requirement for an inventory loan is to have a business that is product-based, not service-based. An inventory loan deals in sales of inventory/stock.
Maximum profit: Using borrowed capital most time is a smart move for a business because it can deliver enough resources to keep the business rolling, and maximizes all expected profit. For example, if you expect to profit from a business investment, the more investment you make, the relatively more profit you will get. It is always a “more you give, the more you get” situation. The more capital that is invested in a business, the greater the potential profit.
Achieving goals faster: Covering day-to-day business expenses can be challenging and can hinder a business from achieving its short- and long-term goals. Getting an inventory loan will help a business achieve its goals at a faster rate, because there will be improvement in the business’ cash flow.
Improved business performance: An inventory loan will provide sufficient cash to enable the business to operate at the highest possible level, because it will have the resources it needs to make bulk inventory orders of and get tangible discounts from suppliers.
Business growth: The more inventory you acquire, the more sales you can make. A business grows and stays ahead of its competitors when it has enough resources. Resources, basically in form of cash, are the heart of every businesses. A business with no resources cannot grow. An inventory loan can be crucial to business growth.
Expand product lines: Inventory loans deliver resources that can allow other product lines to supplement current lines. By adding supplementary inventory, a business can stay ahead of its competitors by meeting the demands of its customers.
Meet seasonal demands: Inventory loans prepare businesses for major business seasons, and help them weather slow seasons.
Difficulty in application: It can be stressful to apply and qualify for an inventory loan. It’s almost impossible to see a lender when your business lacks strong sales.
Possible increase in interest rate: Be aware that the inventory loan interest will potentially increase as the business’s value rises.
Unlike other traditional lending options, an inventory loan application can be lengthy, stressful and technical, requiring many document submissions, an interview, and even an audit of the business’s financials. To apply for an inventory loan, the following steps must be followed:
Business financials must be prepared: Prepare your financial documentation before engaging an inventory loan lender. A business’s financial documents must include Balance Sheets, Profit and Loss Statements, Sales Forecast, Personal Tax Return (PTR), Business Tax Returns (BTR), Business Bank Statements (BBS), Inventory List, and Inventory Management Records (IMR)
Submit your application: After meticulously preparing the above documents, submit your application with the financial documents. Submission will likely be via electronic means.
Review the inventory loan offer: This step is crucial. You must meticulously review the inventory loan offer, as you will be asked to sign a loan agreement to mitigate the lender’s risk.
Undergo a field audit: Most lenders will conduct a field audit of your business. During the audit, a representative inspects your business to be sure it’s worthy of the lender’s resources.
Await Final Approval: By the end of your audit, you should know if you and the lender are a good match. At this point, all you can do it to await feedback.
Contact Globelend Capital today for help with acquiring an inventory loan.