Borrowing against inventory?
Anyone have experience using inventory-backed loans for working capital? I'd love to hear how it went, pros/cons, and recommendations for lenders that work well with small main street businesses. Thanks!
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by a searcher
from University of Oklahoma - Michael F. Price College of Business
in Oklahoma City, OK, USA
in Oklahoma City, OK, USA
3mos ago
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by a professional-advisory
3mos ago
from University of Alabama in Baltimore, MD, USA
from University of Alabama in Baltimore, MD, USA
Inventory-backed loans are not what I'd recommend, unless you absolutely have no choice. I've always had a LOC, tied to my signature, or some other asset. Never my inventory. If the market drops and your lender gets nervous, they can do an 'reassessment' and if they determine the 'value' is lower in the current market, they can force you to generate the difference in cash. I've seen it happen. Another option is Factoring.
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by a lender
3mos ago
from Belmont Abbey College in Boca Raton, FL, USA
from Belmont Abbey College in Boca Raton, FL, USA
For Inventory loans, the lender will typically required a valuation (appraisal). Also, reporting to the lender is key...typically weekly reporting is required on a roll forward basis. This means you must have cash posting weekly and a perpetual inventory tracking system. Finally, inventory financing is a specialty finance product and is priced that way due to the monitory costs associated with it.
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