The Myth Of Inventory Finance Firms

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Your firm carries it. You will need to finance it. We’re of course talking about inventory. Discussions with clientele reveal a lot of misconceptions about inventory financing in Canada. Let’s attempt and resolve some of these myths about the financing of your inventory, who the players are, who they are not ( that’s the most prevalent myth ) and we’ll also attempt and provide some straight forward path on next steps in your inventory financing challenge.

The overall quality of your inventory management will play a huge element in your ability to finance your products, which are a component of the current assets component of your balance sheet. You can not overlook the value that an inventory lender will location on your potential to report and count your goods. The reality is that most firms are either carrying a ‘ continuous’ or ‘ ‘periodic’ method of inventory manage.

So here is # 1 – be conscious that inventory lenders favor a continuous variety of inventory accounting, for all the clear causes. Primarily you are counting and monitoring inventory (with the use of application of course!) at all times. That is a very good factor when it comes to a lenders valuation on an ongoing basis and their potential to lend.

You happen to be business is increasing. Sadly so is your inventory! And that areas a large drain on your cash flow. The working capital cycle dictates that cash turns into inventory which turns into receivables and then we commence all over… that lag can be anywhere from 60 – 120 days, from time to time longer. In no way underestimate the dilemma that greater sales will bring to your inventory financing wants.

Clientele normally are looking for inventory financing since the level of investment that you have in item and receivables drains your cash flow. As sales volumes boost your cash flow decreases primarily based on your all round collection period of A/R and of course those inventory turns.

Your sales employees of course under no circumstances desires to be in a position to tell a consumer you never have the solution they have worked so difficult to sell.

Does your firm have an inventory financing technique? The majority of firms we speak to in Canada, surely in the tiny and medium company sector do not have access to the inventory financing they will need. Do accurate inventory financing organizations exist in Canada? We really feel that the answer is commonly ‘ no ‘, they do not. Even so if your firm would look at an asset primarily based lending scenario that in impact requires the spot of inventory finance businesses in Canada.

Below an asset based lending method your inventory is margined for what its worth, by professionals who categorically know what its worth. You will enhance your capability to finance your product if you have the controls, reporting, and inventory accounting program in locations that makes the inventory and asset primarily based lender ‘ comfortable ‘.

Speak to a trusted, credible, and skilled company financing advisor with regards to inventory financing corporations and asset based lenders who will give your product the financing it deserves!

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