{"id":7897,"date":"2023-05-20T06:45:00","date_gmt":"2023-05-20T06:45:00","guid":{"rendered":"https:\/\/www.kredx.com\/blog\/?p=7897"},"modified":"2023-10-26T04:35:51","modified_gmt":"2023-10-26T04:35:51","slug":"inventory-financing-getting-inventory-loans-to-grow-your-business","status":"publish","type":"post","link":"https:\/\/www.kredx.com\/blog\/inventory-financing-getting-inventory-loans-to-grow-your-business\/","title":{"rendered":"Inventory Financing: Getting Inventory Loans to Grow Your Business"},"content":{"rendered":"\t\t<div data-elementor-type=\"wp-post\" data-elementor-id=\"7897\" class=\"elementor elementor-7897\">\n\t\t\t\t\t\t<section class=\"elementor-section elementor-top-section elementor-element elementor-element-3143d45e elementor-section-boxed elementor-section-height-default elementor-section-height-default\" data-id=\"3143d45e\" data-element_type=\"section\">\n\t\t\t\t\t\t<div class=\"elementor-container elementor-column-gap-default\">\n\t\t\t\t\t<div class=\"elementor-column elementor-col-100 elementor-top-column elementor-element elementor-element-15c3ad72\" data-id=\"15c3ad72\" data-element_type=\"column\">\n\t\t\t<div class=\"elementor-widget-wrap elementor-element-populated\">\n\t\t\t\t\t\t<div class=\"elementor-element elementor-element-46ad5464 elementor-widget elementor-widget-text-editor\" data-id=\"46ad5464\" data-element_type=\"widget\" data-settings=\"{&quot;ekit_we_effect_on&quot;:&quot;none&quot;}\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t<p><span style=\"font-weight: 400;\">Maintenance of stocks, or inventory, is the core requirement of any business that indulges in the trade. However, a lean sales period can leave a considerable slice of an enterprise\u2019s investment locked up in its inventory. A business faced with a shortage of funds fails to honour its short-term payment obligations, which can hamper its credibility. And, in such a circumstance, <\/span><a href=\"https:\/\/www.kredx.com\/blog\/the-pros-and-cons-of-business-inventory-loans\/\">inventory financing<\/a><span style=\"font-weight: 400;\"> can be extremely resourceful.<\/span><\/p><h2><b>What Is Inventory Financing, And How Does It Work?\u00a0<\/b><\/h2><p>Inventory financing<span style=\"font-weight: 400;\"> is an asset-backed, short-term financial solution. A business can avail funds on the value of some or all of its inventory and pledging the same as collateral. The financial institution or lender determines a percentage based on which the loan is granted. As and when such business repays, the financier lifts the lien on its stock.\u00a0<\/span><\/p><p><span style=\"font-weight: 400;\">The percentage of funding and interest rate offered for these loans vary from one lending institution to another, premised upon the volume of a firm\u2019s inventory.\u00a0<\/span><\/p><p>Inventory financing<span style=\"font-weight: 400;\"> is especially beneficial to businesses that have to own and manage substantial quantities of inventory. Given its nature, retailers, wholesalers, seasonal businesses, and other product-based enterprises incline towards this financial solution.\u00a0\u00a0<\/span><\/p><h2><b>What Are The Types Of Inventory Financing?\u00a0<\/b><\/h2><p><span style=\"font-weight: 400;\">Based on the nature of a business and that of its products, there are two types of <\/span>inventory financing<span style=\"font-weight: 400;\">:<\/span><\/p><ul><li><b>Inventory Loan: <\/b><span style=\"font-weight: 400;\">This financing solution is applicable for a business faced with an immediate cash requirement. It is extended to borrowers as a one-time loan. Here, a firm leverages its inventory\u2019s resale value to receive a loan, which is then employed to plug in its cash crunch.\u00a0<\/span><\/li><li><b>Inventory Line of Credit:<\/b><span style=\"font-weight: 400;\"> Contrary to inventory loans, an inventory line of credit is an ongoing financing option. A lender sanctions a credit limit from which the borrower can withdraw cash as many times as required. Businesses can use the funds availed from an inventory line of credit to cope with unforeseen expenses.\u00a0<\/span><\/li><\/ul><h2><b>Eligibility Criteria For Inventory Financing\u00a0<\/b><\/h2><p><span style=\"font-weight: 400;\">Each financial institution or lender levies its own set of criteria for prospective borrowers. Given below are some generic eligibility criteria to avail a loan through <\/span>inventory financing<span style=\"font-weight: 400;\">:<\/span><\/p><ul><li><span style=\"font-weight: 400;\">An applicant should be at least 18 years of age.\u00a0<\/span><\/li><li><span style=\"font-weight: 400;\">He\/she must be a citizen of India.<\/span><\/li><li><span style=\"font-weight: 400;\">Applicants should not have any credit default history with a financial institution.<\/span><\/li><li><span style=\"font-weight: 400;\">The firm should be operational for a minimum of one year and in the same location.\u00a0<\/span><\/li><li><span style=\"font-weight: 400;\">Considerable annual turnover (its exact figure is subject to vary with each lending institution)<\/span><\/li><li><span style=\"font-weight: 400;\">Enterprises that are applying should have a healthy credit rating.<\/span><\/li><li><span style=\"font-weight: 400;\">Business must be profitable with a steady sales history.<\/span><\/li><\/ul><h2><b>How To Apply For Inventory Financing?\u00a0<\/b><\/h2><p><span style=\"font-weight: 400;\">The application process varies with each financial institution, but the gist of it remains similar, which is as below:<\/span><\/p><h3><b>Step 1:<\/b> <b>Compile Financial Records Of The Business<\/b><\/h3><p><span style=\"font-weight: 400;\">Before applying for a loan, borrowers must possess the following financial records:<\/span><\/p><ul><li><span style=\"font-weight: 400;\">Balance Sheet<\/span><\/li><li><span style=\"font-weight: 400;\">P\/L statements<\/span><\/li><li><span style=\"font-weight: 400;\">Business bank statements<\/span><\/li><li><a href=\"https:\/\/www.leadsquared.com\/learn\/sales\/sales-forecasting\/\" target=\"_blank\" rel=\"noopener\"><span style=\"font-weight: 400;\">Sales forecast<\/span><\/a><\/li><li><span style=\"font-weight: 400;\">Inventory list and management records<\/span><\/li><li><span style=\"font-weight: 400;\">Business tax returns<\/span><\/li><\/ul><h3><b>Step 2:<\/b> <b>Complete The Initial Application<\/b><\/h3><p><span style=\"font-weight: 400;\">Borrowers can apply for a loan by visiting the nearest branch of their preferred lending institution or taking the online route. The process begins with filling out an application form, stating particulars, such as their name, business name, loan amount etc. Then, they are required to submit this form and the relevant financial records.<\/span><\/p><h3><b>Step 3:<\/b> <b>Submit Additional Documents<\/b><\/h3><p><span style=\"font-weight: 400;\">Alongside the application form and financial statements, a borrower must also submit the following:<\/span><\/p><ul><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Applicant\u2019s passport-sized photographs\u00a0<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Income proof with financials<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Personal ITRs<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">KYC documents of business partners, promoters, or co-applicants<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Company\u2019s registration certificate<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Business PAN card with GST and Sales Tax registration<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Address proof of the business<\/span><\/li><\/ul><p><span style=\"font-weight: 400;\">After successful application, the lending institution sets about credit appraisal and valuation of business inventory. Thereafter, it ascertains the terms of loan and presents the same to a borrowing enterprise. The loan gets sanctioned after the business accepts these terms and pledges its inventory as collateral.<\/span><\/p><p><span style=\"font-weight: 400;\">Needless to say, the application process for <\/span>inventory financing <span style=\"font-weight: 400;\">can be taxing and time-taking, especially for smaller enterprises. In that case, borrowers can turn to platforms such as <\/span><i><span style=\"font-weight: 400;\">MANDII<\/span><\/i><span style=\"font-weight: 400;\"> \u2013 an independent technology platform explicitly curated to benefit small businesses. A business can apply for <\/span>inventory financing<span style=\"font-weight: 400;\"> on this easy-to-use platform through an online and hassle-free process, with a quick processing time of 0-30 minutes.\u00a0<\/span><\/p><h2><b>Bottom Line\u00a0<\/b><\/h2><p>Inventory financing<span style=\"font-weight: 400;\"> offers an ideal financing avenue for small enterprises, which are often ineligible for traditional loans. Borrowers opting for this financial solution must keep in mind that the business\u2019 industry, credit history, financial standing, and market value of its inventory play a key role in ascertaining the terms of loan offered.<\/span><\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t<\/div>\n\t\t","protected":false},"excerpt":{"rendered":"<p>Maintenance of stocks, or inventory, is the core requirement of any business that indulges in the trade. However, a lean sales period can leave a considerable slice of an enterprise\u2019s investment locked up in its inventory. A business faced with a shortage of funds fails to honour its short-term payment obligations, which can hamper its [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":7899,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[34],"tags":[59,58],"class_list":["post-7897","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business-loan","tag-inventory-loans","tag-loans"],"_links":{"self":[{"href":"https:\/\/www.kredx.com\/blog\/wp-json\/wp\/v2\/posts\/7897","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.kredx.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.kredx.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.kredx.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.kredx.com\/blog\/wp-json\/wp\/v2\/comments?post=7897"}],"version-history":[{"count":11,"href":"https:\/\/www.kredx.com\/blog\/wp-json\/wp\/v2\/posts\/7897\/revisions"}],"predecessor-version":[{"id":16676,"href":"https:\/\/www.kredx.com\/blog\/wp-json\/wp\/v2\/posts\/7897\/revisions\/16676"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.kredx.com\/blog\/wp-json\/wp\/v2\/media\/7899"}],"wp:attachment":[{"href":"https:\/\/www.kredx.com\/blog\/wp-json\/wp\/v2\/media?parent=7897"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.kredx.com\/blog\/wp-json\/wp\/v2\/categories?post=7897"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.kredx.com\/blog\/wp-json\/wp\/v2\/tags?post=7897"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}