Learn the basics of inventory financing
Many businesses need financing, but aren’t sure if they have the type of collateral to fund a loan. The good news is that stocks can be used as collateral for loans.
What is inventory finance?
By Investopedia, “Inventory finance is a revolving line of credit or short-term loan that is acquired by a business so that it can purchase products to sell later. The products serve as collateral for the loan. ”
How inventory finance works
A business owner can use existing inventory as collateral for financing the business. They will need inventory worth $ 300,000 or more. A business owner can get approved for a line of credit for 50 percent of the value of the inventory. The rates are generally 5 to 15 percent. It depends on the type of inventory. You can get financing in three weeks or less. It cannot be an inventory that you consolidate, such as office equipment.
There may be restrictions on the type of inventory that can be used. This may include banning cannabis or perishables. There may be minimum income and / or FICO score requirements.
Suppliers have varying requirements and nuances for their programs. Inventory financing can include favorable terms for purchasing inventory.
Did you know that Amazon offers a business line of credit? You can benefit from a renewable line or pay in full. A business can authorize multiple buyers on a single account. You can also download order history reports and pay via a purchase order. For more information see: amazon.com/gp/cobrandcard/marketing.html.
With the full payment line of credit, a business will benefit from 55 day net billing terms to pay in full without interest. The business can set up primary and secondary accounts for multiple buyers. And they will have a dedicated account manager.
For revolving line of credit, a borrower can make minimum payments or pay in full monthly. They will pay 12.99 percent purchase at the Annual Percentage Rate (APR). The minimum interest charge is $ 1. They have the possibility to apply as a personal guarantor to create a business loan.
There are also Amazon lines of credit and working capital loans. If a business is eligible, the owner will see financing options when they log into Seller Central. Currently, Marcus by Goldman Sachs offers the company’s lines of credit. Loans come from Amazon loan. All the specific conditions will be adapted to the company. A business can have access to loan funds within 5 days.
Kick further allows businesses to fund their next inventory purchase with customer and brand supporter funding and raise money directly for them. This is how it works. Customers buy through what is called a “consignment opportunity”. Customers then end up owning the products they have helped finance. That is, until these products are sold by the brand. As soon as the products sell, the customer will collect payments. Kickfurther also offers an online store. It’s up to companies to market and sell their products.
A company can get 12 month terms from Shopify Capital. They then repay with a percentage of daily sales. They can borrow between $ 200 and $ 1 million. A company’s risk profile will determine the total amount owed and the daily repayment rate.
On the bridge offers inventory loans and lines of credit to businesses. Term loans range from $ 5,000 to $ 250,000. There are 12 month terms to be repaid daily or weekly. Lines of credit range from $ 6,000 to $ 100,000. The business can repay over 12 months, with automatic weekly payments.
Key points to remember about inventory financing
Entrepreneurs can obtain inventory financing for physical and e-commerce businesses. Or they can use business assets as collateral for business loans. Amazon, Shopify Capital, Ondeck, and Kickfurther offer even more options.