The concept of inventory financing is based on the simple principle of improving your business ability to pay the suppliers for the smooth generation of inventory. Since most of the work done by the firm is on credit basis, you have little time in which you receive payments for your sales and pass it down to your suppliers.
In case of delay in receipts, you need to have a cash flow that can be arranged instantly so that your work in progress does not suffer and this is exactly where inventory financing comes into play. It allows you to get short-term loans to finance your inventory and prepare yourself for future demands of your product.
The following step-by-step procedure is followed for obtaining inventory finance in Australia:
Fill in the complete application form that your finance provider requires. Most of the financial institutions require you to attach three to five years of business operation’s statements (including the statement of financial positions, profit and loss statement and the statement of cash flows) along with the application form.
The financial institution sends its agent for inspection of the business or firm to ensure that there is a proper running business and then the amount of credit line is agreed upon.
The final agreement is signed and all the parties involved are informed via email, fax or postal mail.
The financial institution issues a bill that also includes the charges applicant firm is liable to pay. This bill has to be cleared within 90 days or a pre decided period of the agreement. At the same time, the finance provider pays the suppliers to ensure smooth running of your business
The entire procedure takes around 15 days to a month, therefore as a business owner you need to plan even while applying for inventory financing.