Your company carries it. It is advisable to finance it. We’re needless to say discussing inventory. Discussions with clients reveal a lot of misconceptions around inventory financing in Canada. Let’s try and resolve some of these myths around the financing of your inventory, who the players are, who they are not ( that’s the most common myth ) and we’ll also try and provide some straight forward direction on next steps in your inventory financing challenge.
https://www.cashfree.com/preauthorization/ of one’s inventory management will play a large part in your ability to finance your products, which are part of the current assets element of your balance sheet. You cannot overlook the importance an inventory lender will put on your capability to report and count your products. The truth is that most firms are either carrying a ‘ continuous’ or ‘ ‘periodic’ system of inventory control.
So here is solid tip number 1# 1 – remember that inventory lenders prefer a continuous type of inventory accounting, for all the obvious reasons. Essentially you’re counting and monitoring inventory (with the use of software of course!) all the time. That’s a good thing in terms of a lenders valuation on a continuing basis and their ability to lend.
You’re company is growing. Unfortunately so is your inventory! And that places a huge drain on your cashflow. The working capital cycle dictates that cash becomes inventory which becomes receivables and then we start all over… that lag can be from 60 – 120 days, sometimes longer. Never underestimate the issue that higher sales will bring to your inventory financing needs.
Clients typically are trying to find inventory financing because the degree of investment which you have in product and receivables drains your cash flow. As sales volumes boost your cash flow decreases based on your overall collection amount of A/R not to mention 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 difficult to sell.
Does your company have a listing financing strategy? Nearly all firms we talk to in Canada, certainly in the tiny and medium business sector do not have usage of the inventory financing they want. Do true inventory financing companies exist in Canada? We believe that the answer is normally ‘ no ‘, they don’t. However if your firm would consider a secured asset based lending scenario that in place takes the place 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 improve your capability to finance your product when you have the controls, reporting, and inventory accounting system in places that makes the inventory and asset based lender ‘ comfortable ‘.
Speak to a trusted, credible, and experienced business financing advisor in relation to inventory financing companies and asset based lenders who will give your product the financing it deserves!
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