It is designed to pay your supplier directly on your behalf allowing you to meet your financial obligations while keeping your shelves supplied and your business’s reputation intact.
It provides businesses with the finance for purchases of inventory for manufacturing or resale for your customers. It is a good way to maintain a good relationship with your suppliers as they are paid in full and on-time. Of course, this relationship depends on if your suppliers can deliver the goods.
Your inventory acts as your collateral. Inventory finance is not particularly suited to a startup due to the absence of a sales record, but it’s something to consider down the track as you grow. The type of business that would benefit most from inventory finance is one with a fast-moving cash flow cycle who replenishes its stock frequently.
This business may not have enough finance to buy goods for its next round of orders, but if those orders are already locked in, inventory finance will prevent the business from tying up extra cash in its stock.