working capital management Working Capital Management | Page 5

INVENTORY FINANCE
Inventory financing is a short
term loan that is made to a
company so that it can
purchase products and then sell
them. These products/inventor
tend to act as collateral for the
loan in case the business fails
to sell the products and thus
unable to repay the loan.
For businesses that have to pay their suppliers in a short
time period, inventory financing happens to be quite useful.
Furthermore, inventory financing/inventory loans offers an
ideal solution for seasonal fluctuations in cash flows so that
business can increase their sales volume like getting extra
stock/inventory during the holiday season for selling.
From a lender’s point of view, inventory financing is a type of
unsecured loan because the business fails to sell its
inventory the bank will not be able to either. This could
partially but clearly explain the end results of the 2008 credit
crisis. Numerous businesses found it quite complicated to
obtain inventory financing. The inventory that has been
made or bought by your business to be sold is a worthy
asset and the value of this inventory can be used for
financing of your business without getting sold.