The Myth Of Inventory Finance Corporations

Your enterprise carries it. You will need to finance it. We’re of course speaking about inventory. Discussions with consumers reveal a lot of misconceptions around inventory financing in Canada. Let’s try and resolve some of these myths about the financing of your inventory, who the players are, who they are not ( that’s the most popular myth ) and we’ll also try and supply some straight forward path on subsequent measures in your inventory financing challenge.

The general good quality of your inventory management will play a massive component in your potential to finance your solutions, which are a part of the existing assets component of your balance sheet. You can’t overlook the value that an inventory lender will spot on your capacity to report and count your items. The reality is that most firms are either carrying a ‘ continuous’ or ‘ ‘periodic’ system of inventory manage.

So right here is strong tip # 1 – be aware that inventory lenders choose a continuous sort of inventory accounting, for all the obvious factors. Basically you are counting and monitoring inventory (with the use of computer software of course!) at all occasions. That’s a great issue when it comes to a lenders valuation on an ongoing basis and their potential to lend.

You are business is developing. Sadly so is your inventory! And that locations a large drain on your cash flow. The operating 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, in some cases longer. Under underestimate the dilemma that greater sales will bring to your inventory financing requires.

Customers usually are seeking for inventory financing simply because the level of investment that you have in solution and receivables drains your money flow. As sales volumes increase your cash flow decreases primarily based on your overall collection period of A/R and of course these inventory turns.

Your sales employees of course never desires to be in a position to tell a buyer you never have the solution they have worked so difficult to sell.

Does your firm have an inventory financing strategy? The majority of firms we speak to in Canada, absolutely in the modest and medium company sector do not have access to the inventory financing they need to have. Do accurate inventory financing corporations exist in Canada? We really feel that the answer is generally ‘ no ‘, they do not. Nevertheless if your firm would take into consideration an asset primarily based lending scenario that in effect takes the location of inventory finance firms in Canada.

Beneath an asset based lending tactic your inventory is margined for what its worth, by experts who categorically know what its worth. You will boost your capability to finance your product if you have the controls, reporting, and inventory accounting technique in places that tends to make the inventory and asset primarily based lender ‘ comfy ‘.

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