You cannot run a profitable business without the right kind of inventory system. However, it’s not always possible to have this in an organisation. That’s why it becomes essential to get extra funding to keep your storeroom and retail shelves full. In these cases, the best choice for your company is inventory financing. This is a type of business loan based mainly on a fraction of your inventory’s value.
Since your inventory secures this form of business loan, some Singapore-based lenders will put minimal emphasis on your credit score. This makes it easy to get financing if you are unable to get a conventional business loan. It is also easier to apply for an inventory loan compared to obtaining other forms of business financing. The following are the types of inventory financing that might be appropriate for your company:
Business Line of Credit
This is one of the fastest forms of inventory financing. With this option, you can also get repeat financing without having to reapply. Business lines of credit are ideal for companies that have recurring cash flow or inventory needs. It also works if you want to supplement cyclical business working capital or have the same purchases each month. The general rate for this inventory loan is 14-55% APR, excluding additional fees like loan origination, service, or draw charges.
Although it is quite slow, this is the standard option for inventory financing. Most banks will also favor companies with optimal credit and good cash flow, making the value of your inventory a secondary element in your application. Although economical, it works for businesses that are not looking for immediate financing. The APR of a bank inventory loan is 4-10%, but some lenders can go as low as 2-5% based on your credit score.
These are primarily based on the worth of your inventory. The inventory will be appraised on-site before the loan is approved after you get the loan. You will have to give monthly inventory levels to prove to your lender that you are managing your inventory correctly. An asset-based loan is your best choice if you are looking for quick cash. The interest rates for this loan range from 10 to18%. Most lenders will advance up to 50% of your inventory’s value and business receivables.
In this alternative, you have to request your vendor to sell your goods on credit. This is generally the easiest method of paying for inventory if you are short on cash since vendors are highly interested in making sales. This form of financing works best for companies with a prior vendor relationship and attracts an interest rate of 1-10%. Most vendors pay little attention to your business’ score when advancing this financing.
Without the right lender for your inventory financing, the above forms of funding may be the cause of your business’ downfall. As such, do not base your choice of lender solely on the rates. Consider the odds of the lender standing with your business in the long term rather than being focused on the profits.