What is Inventory Financing?

Inventory financing is a form of asset-based lending that allows businesses to use inventory as collateral to obtain a revolving line of credit. This line of credit can be used to purchase additional inventory or to help a business get through seasonal fluctuations in cash flow, among other situations.

Who should use Inventory Financing?

  • Small- to medium-sized retailers: One type of business that traditionally depends on inventory financing is retailers. While larger companies, such as Wal-Mart and Target, have larger institutional banks to borrow from and often have easier access to this form of asset-based lending, smaller businesses could benefit greatly from the same type of financing, but from an alternative source providing similar lines. Some of these companies generally don’t have the available capital or financial history to obtain a loan from a bank or might struggle during seasonal slowdowns, which is why the services of Crestmont Capital should be utilized.
  • Small- to medium-sized wholesalers: Another type of business that could benefit from inventory financing is wholesalers. Companies of this size might have a warehouse full of goods ready to ship over the coming months, but don’t have any resources available for the next production cycle, and for similar reasons have been turned down by a bank. In this situation, a revolving line of credit comes in handy.

How Can Inventory Financing Benefit a Small Business?

Retailers and wholesalers alike can experience many benefits, including:

1. Help keep shelves stocked – To continue to attract customers, and have product to sell, retailers will need to have product on the shelves. For small- to medium-sized businesses with limited available capital, this can be difficult to do. However, with inventory financing, these companies are able to use the revolving line of credit to borrow on inventory and have the funds needed to keep their shelves stocked.

2. Provide financing when a bank says “No” – Another instance where small businesses might find this type of asset-based lending beneficial is when they are turned away from a bank. Small- to medium-sized retailers, as well as wholesalers with poor credit history or inadequate cash flow, might find it difficult to obtain financing from a bank. However, this isn’t the case with Crestmont Capital’s inventory financing, as it allows a company to use current product as collateral.

3. Assistance during periods of lagging cash flow – While retailers see an influx of business during the holiday season, there are other periods during the year where sales may not be as high. During these times, cash flow could be lagging, which can make operating at normal levels difficult. Businesses that experience periods of slow cash flow can talk to Crestmont Capital for assistance.