The Myth Of Inventory Finance Companies

Your company carries it. You need to finance it. We’re needless to say discussing inventory. Discussions with clients reveal a lot of misconceptions around inventory financing in Canada. Let’s try and resolve some of these myths around the financing of one’s inventory, who the players are, who they’re not ( that’s the most typical myth ) and we’ll also try to provide some self-explanatory direction on next steps in your inventory financing challenge.

The overall quality of your inventory management will play a big part in your capability to finance your products, which are part of the current assets element of your balance sheet. https://www.cashfree.com/blog/payment-systems-for-ecommerce/ cannot overlook the importance that an inventory lender will put on your ability to report and count your products. The truth is that a lot of firms are either carrying a ‘ continuous’ or ‘ ‘periodic’ system of inventory control.

So here is solid tip number 1# 1 – remember that inventory lenders prefer a continuing type of inventory accounting, for all your obvious reasons. Essentially you are counting and monitoring inventory (with the use of software of course!) at all times. That’s a good thing in terms of a lenders valuation on an ongoing basis and their ability to lend.

You’re company keeps growing. Unfortunately so can be your inventory! And that places an enormous drain on your cash flow. The working capital cycle dictates that cash becomes inventory which becomes receivables and then we start all over… that lag can be anywhere from 60 – 120 days, sometimes longer. Never underestimate the problem that higher sales provides to your inventory financing needs.

Clients typically are searching for inventory financing because the level of investment which you have in product and receivables drains your money flow. As sales volumes boost your cash flow decreases predicated on your overall collection amount of A/R not to mention those inventory turns.

Your sales staff needless to say never wants to maintain a position to tell a person you don’t have the product they have worked so difficult to sell.

Does your company have an inventory financing strategy? The majority of firms we talk to in Canada, certainly in the small and medium business sector do not have usage of the inventory financing they want. Do true inventory financing companies exist in Canada? We believe that the answer is generally ‘ no ‘, they do not. However if your firm would consider a secured asset based lending scenario that in effect takes the place of inventory boat loan companies in Canada.

Under an asset based lending strategy your inventory is margined for what its worth, by experts who categorically know what its worth. You will enhance your ability to finance your product when you have the controls, reporting, and inventory accounting system in places that makes the inventory and asset based lender ‘ comfortable ‘.

Speak to a reliable, credible, and experienced business financing advisor in relation to inventory financing companies and asset based lenders who will give your product the financing it deserves!