The Myth Of Inventory Finance Companies

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

The overall quality of your inventory management will play a large part in your capability to finance your products, which are part of the current assets component of balance sheet. You cannot overlook the importance an inventory lender will put on your ability to report and count your products. The reality is that a lot of firms are either carrying a ‘ continuous’ or ‘ ‘periodic’ system of inventory control.

So here’s solid tip # 1# 1 – remember that inventory lenders prefer a continuous type of inventory accounting, for all your obvious reasons. Essentially you are counting and monitoring inventory (by using software of course!) all the time. That’s a good thing with regards to 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 cashflow. The working capital cycle dictates that cash turns into inventory which becomes receivables and we start around… that lag can be from 60 – 120 days, sometimes longer. Never underestimate the issue that higher sales provides to your inventory financing needs.

Clients typically are looking 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 period of A/R and of course those inventory turns.

Your sales staff needless to say never wants to be in a position to tell a customer you don’t have the merchandise they have worked so hard to sell.

Does your company have a listing financing strategy? Nearly bayanipay talk to in Canada, certainly in the tiny and medium business sector don’t have access to 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 area of inventory finance companies in Canada.

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

Speak to a reliable, credible, and experienced business financing advisor with regards to inventory financing companies and asset based lenders who’ll give your product the financing it deserves!