How Does Lending on Inventory Work for Distributors and Manufacturers
Posted on July 22, 2013 in Distribution
When a manufacturing company, wholesale distributor or retail sales business obtains funding from an inventory lender, it enables them to carry on business without delays and other problems due to lack of financial backing. This type of asset-based funding is crucial to the ongoing success of any product-based business. It benefits all aspects of the business from project design to factory production to packing, shipping and delivery of an inventory to its destination. During the manufacturing process, previously acquired funding pertaining to the company's stock inventory now aids the production stage of future products for sales inventory.
Sales businesses that manufacture their own brand or line of goods for sale rely heavily on inventory finance to ensure their capability to produce the necessary product volumes to satisfy their new customers and loyal clients. Buyers often favor manufacturers that operate using responsible sources for lending on inventory since this popular funding method provides the manufacturer with the financial stability to succeed and excel in business over an extended length of time. Product buyers know that this kind of ongoing financial support will finance inventory to enhance profitability for all involved in the manufacturing, distribution, sales and consumption of these goods. A reliable professional asset-based lender will finance myriad types of inventories as long as the products are proven to be marketable and popular among consumers in the current marketplace.
Advantages of Inventory Finance for Manufacturing and Sales Companies
There are several major advantages of inventory finance for both manufacturing and sales enterprises, including the following:
• Fast Approval of Inventory-Based Loans. – Inventory lenders often approve these product-based loan requests much more quickly than other types of funding agencies. Securing inventory finance support often requires less demanding documentation and is much simpler than seeking other forms of funding. It is based on the appraised value of company inventories which can easily be determined by inventory evaluation experts.
• Easier Loan Qualification for Many Companies. – Many sales and production companies previously unsuccessful at obtaining business funding can quality more easily for inventory loans. Lending on inventory often works especially well to finance inventory for businesses with such limitations as:
1. A poor or fluctuating credit rating;
2. Time periods when emphasis on production needs overrides a strong focus on maintaining or increasing profit levels;
3. A need to rely on one lending agent to meet financial demands of the company's total business operations;
4. A company financial status that relies on the value of a single inventory or several related inventories.
Because funding based on assets is often more versatile and reliable than other forms of lending, it has become a favored form of lending among both funding agents and borrowers in numerous product manufacturing, distribution and sales businesses.
Necessary Steps to Acquiring an Inventory Loan
There are several essential steps to obtaining an inventory loan for your company. Your inventory finance agent will want to be assured that you can meet regular loan payments from profits on your ongoing inventory turnover through high sales volumes. When applying for your asset-based loan, you will most likely be required to submit specific data and information, including:
• An accurate overview and accounting of your current inventory;
• A comprehensive financial review of your company;
• A current business plan that reveals continuous increases in productivity and profits;
• Sales records revealing successful sales levels of all inventory products;
• One additional form of collateral such as company-owned property or a secondary placement on a mortgage.
When you have successfully satisfied these loan application criteria, your inventory loan agent should provide you with fast notification concerning your loan approval status. It is highly probable that, if you meet the necessary requirements, your request for lending on inventory will be approved. Once your loan is issued, you will have the added assurance and confidence that your company's production and sales operations can proceed at full speed toward the strong promotion and benefit of your continuing business success.