All about inventory financing

As a company owner, business banking solutions serve a large role in your growth potential.

Unless you have a large sum of cash laying around, you'll need some investments to get your business off the ground and throughout the years to fund your business's growth. As the old saying goes, you have to spend money to make money, and financing is a great way to get started.

One option to consider is inventory financing. This is a type of asset-based financing that is beneficial for business owners such as florists and other merchandise retailers who sell products.

What is inventory financing?
If you're starting a business with investor capital, there's a good chance you'll require financial assistance when it comes to purchasing the first batch of items you're going to sell. Inventory financing is one way to get these funds.

The process is akin to mortgages. Your business receives money to purchase assets - in this case your inventory - which then acts as collateral for the loan. In the event you can't sell the items, they can be repossessed and sold to cover the loan amount.

One key factor to remember is not all assets are eligible as collateral. The decision to provide financing - and the amount of money your business can receive - varies based on several factors. These criteria may include whether the inventory item is a complete product or raw material and how popular it is with your customers.

Benefits of inventory financing
One immediate advantage of this type of loan is you can get the products or materials you need now and pay for them later. In some cases, suppliers want to be paid upfront, which isn't possible if your business just started and doesn't have the capital for the purchase.

Inventory financing can also be a benefit for a business years after it's off the ground. At certain points of the year, your business may need to acquire more inventory in preparation for an upcoming busy season. However, if cash flow is tight because of the slower season, you may need an advance to expand your inventory in anticipation of more business. With inventory financing, you can purchase the products or materials you need and repay the loan over time as sales recoup the debt.

For more information about how you can grow your business, contact Landmark Bank.

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