What is Inventory Financing?
Inventory financing is when a business needs capital to acquire products for their business. Any business that carries inventory needs to have their shelves stocked consistently. We understand the sales cycle and vendor payments. Obtaining a loan or a business line of credit to purchase inventory can help you rotate more products and increase productivity. This is particularly true if you have an opportunity to buy that inventory at a discount.
Capital Makes a Difference When Purchasing Inventory
How quickly your inventory turns is an important element in choosing a loan for your business. For example, if you expect your inventory to turn in one to three months, it will not make sense to obtain a long-term loan. A shorter-term loan will be more feasible. Why? You can gain access to capital every time you need inventory. A long-term loan will not make sense because next time you need to make an inventory purchase you will not have access to capital.
When you consider a small business loan for buying inventory, you need to take into consideration various factors such as:
– Turnover Time
– Accounts Receivable Time Frame
– Return on Investment
– Projected Purchases
Another solution is a business line of credit. Unlike a business loan, a line of credit allows the business owner to access part, or all, of the credit line, repay it, and access it again as needed.