Inventory Financing for SMBs
Providing small and medium-sized businesses with the right inventory financing solutions to start or scale their operations.
Inventory Financing Options
Anyone who has ever started a business knows that there are many expenses to consider. One of the biggest is inventory — you need to have merchandise on hand to sell to customers. But what if you don’t have the money to purchase inventory? That’s where inventory financing comes in.
This type of financing can help you stock up on inventory and grow your business. There are several different types of inventory financing options available, and Charter Capital can help connect you with the best lender with the ideal inventory financing rates to support your growth for short- and long-term ventures.
Small businesses often turn to inventory financing to:
- Stock inventory in preparation for a busy season
- Take care of short-term cash shortages
- Unlock capital tied up in stocks
- Expand product lines
- Meet growing customer demand and increase sales
- Purchase equipment and storage units to better manage inventory
Charter Capital has been helping small and medium-sized businesses with their evolving inventory needs for the past 40 years, building a network of over 20 trusted lenders to provide the financing support our customers need. When you need cash upfront to bolster your expansion and growth plans, you can count on our experienced financial brokers to find the best lending partner for you. Contact us today to learn more about the inventory financing options that are available.
Some of our customers...
- are interested in the lowest rate.
- are interested in a specific tax treatment.
- want to avoid breaching existing lending covenants.
- are interested in the longest term.
- are interested in getting reimbursed for equipment they have already paid for.
- want seasonal or other cyclical structures.
- want to finance software.
- want us to give the seller a deposit before the equipment is shipped.
All of our customers want a fair deal at a fair price and no surprises.
What is Inventory Financing?
Inventory financing is a type of asset-based loan in which the borrower uses inventory as collateral for repayment. It can be used by businesses that have fluctuating sales. With this type of financing, a business can add new inventory when sales increase and then pay down what was borrowed when it goes through a lean period.
Since inventory declines in value over time, it is usually not financed for longer than 12 months. To take out an inventory loan, a company needs to submit financial records including balance sheets, income statements, and cash flow projections to determine how much money it can borrow.
Even if what you are selling is not perishable, inventory financing can still help. For example, what you sell could go through seasonality. Depending on what your product or service is, it might make sense for you to seek out what is called seasonal inventory financing (i.e., what you need during Thanksgiving or Christmas time).
Steps To Applying for Inventory Financing
Whether you’re looking for startup inventory financing or additional funds to further grow an existing business, the loan process is pretty much the same across lenders.
- Gather financial records and prepare your balance sheet to determine what you can borrow. If what you sell goes through seasonality, it might make sense for your inventory to be financed over different seasons of the business.
- Fill out an inventory loan application. Whether what you are selling is perishable or not, they are considered non-traditional assets that may be used as collateral.
- Submit your loan application. If what you owe on already existing loans does not exceed six months’ worth of payments, this means you do not have bad credit. This will increase the chances of getting the inventory loan you are applying for.
- If accepted, the lender will typically provide you with a blanket loan. This means multiple loans can be spread throughout different times of the business, so you’ll always have funds to turn to when your stock needs shift with the seasons.
Talk to our team at Charter Capital to explore the different options for inventory financing, depending on the lender you will be working with. The processes of securing a loan may vary from one lending institution to another, but you can count on Charter Capital to stay with you throughout the entire process.
Inventory Financing Costs: Things You Should Know
The rules for inventory financing differ depending on the provider, but here are some tips you should know in general:
- Inventory financing usually carries a floating lien. This means that what you owe will change once what you are selling goes through a lean period in sales and what you need to finance your inventory fluctuates.
- Because what you’re selling devalues over time, it’s important to keep up with proper maintenance on what you have borrowed using inventory financing (i.e., do not let what you are selling become obsolete or break from neglect).
- In the event there is too little of your inventory to collateralize against, some lenders may require accounts receivable as part of what they accept as collateral.
- Some lenders may charge warehouse fees. This means that if what you are selling does not sell quickly, then you can expect to pay extra in the form of a storage fee.
Ready to stock up on inventory? Get in touch with the Charter Capital team today to explore all the available financing options to support your inventory requirements.