{"id":7909,"date":"2021-06-21T08:18:40","date_gmt":"2021-06-21T08:18:40","guid":{"rendered":"https:\/\/www.kredx.com\/blog\/?p=7909"},"modified":"2023-10-26T05:51:23","modified_gmt":"2023-10-26T05:51:23","slug":"what-is-inventory-financing-and-how-do-you-apply-for-it","status":"publish","type":"post","link":"https:\/\/www.kredx.com\/blog\/what-is-inventory-financing-and-how-do-you-apply-for-it\/","title":{"rendered":"What Is Inventory Financing And How Do You Apply For It?"},"content":{"rendered":"\t\t<div data-elementor-type=\"wp-post\" data-elementor-id=\"7909\" class=\"elementor elementor-7909\">\n\t\t\t\t\t\t<section class=\"elementor-section elementor-top-section elementor-element elementor-element-35b5aff0 elementor-section-boxed elementor-section-height-default elementor-section-height-default\" data-id=\"35b5aff0\" 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-681fe8e\" data-id=\"681fe8e\" 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-1aa54f5c elementor-widget elementor-widget-text-editor\" data-id=\"1aa54f5c\" 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;\">Businesses built around selling products know the struggle of maintaining decent cash flow through and through. The availability of funds to meet these short-term financial crises can make or break a company, especially a small or new one. <\/span><b>Inventory financing<\/b><span style=\"font-weight: 400;\"> is an excellent way for companies to meet the demands of suppliers while helping their businesses grow.<\/span><\/p><h2><b>What Is Inventory Financing?<\/b><\/h2><p><b>Inventory financing<\/b><span style=\"font-weight: 400;\"> is a debt-based mode of advance that lending institutions offer against the value of business inventory. Borrowers can use these funds to purchase new inventory with the aim to sell them. The return from the final sale or the resale value, can help them repay their debts as well as gradually accumulate profit.\u00a0<\/span><\/p><p><span style=\"font-weight: 400;\">The resale value is also a significant factor that helps lending institutions decide on the percentage of loan to be sanctioned. Businesses can simultaneously make use of their pledged inventory to build returns while availing this financial product as long as all repayment conditions are met. However, to successfully avail funds through this mode, borrowers need to know the detailed application procedure.<\/span><\/p><h2><b>How To Apply For Inventory Funding?<\/b><\/h2><p><span style=\"font-weight: 400;\">Here is a step-by-step guide on the detailed application procedure for <\/span><b>inventory financing<\/b><span style=\"font-weight: 400;\">.<\/span><\/p><h3><b>Step 1:<\/b> <b>Meet The Eligibility Requirements<\/b><\/h3><p><span style=\"font-weight: 400;\">The eligibility parameters to qualify for inventory funding may vary across financial institutions. However, the essential ones remain standard.<\/span><\/p><ul><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Applying company must have a sound credit profile with no record of any type of credit violation.<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The company should be located in India and must have been operational for at least a year.<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Borrower must be able to provide a complete and accurate sales record of stock for at least 6 months.<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Applying business must meet the minimum turnover limit specified by their lending institution.<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Business inventory must have a high resale value.\u00a0<\/span><\/li><\/ul><p><span style=\"font-weight: 400;\">Note that low sales coupled with high debt might not be a good idea when applying since it may lead to rejection.<\/span><\/p><h3><b>Step 2: Organise All Required Documents<\/b><\/h3><p><span style=\"font-weight: 400;\">Here is a list of documents that applicants may need to submit in order to qualify. Therefore, keeping them ready in advance can save any delay in loan processing.<\/span><\/p><ul><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Audited company balance sheet<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Audited company P\/L statements<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Business tax returns<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">KYC documents of applicant\/co-applicant\/partners<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Company registration certificate<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Documents related to inventory details and management<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Copy of inventory sale invoices<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Cancelled business cheque<\/span><\/li><\/ul><h3><b>Step 3: Apply Online Or Offline<\/b><\/h3><p><span style=\"font-weight: 400;\">After checking with the above two processes, businesses can proceed to fill in the application form. For this, they can either walk into a physical branch of their chosen lender or complete the process online. After filling in the form accurately, applicants must attach all mandatory documents accordingly.<\/span><\/p><p><span style=\"font-weight: 400;\">Upon completing the above process, a representative of the lending institution will conduct stock evaluation and loan appraisal. Thereafter, they will ascertain the terms and conditions and forward the same to the borrowing party. Funds will be sanctioned once the latter agrees to these rules and pledges the required inventory.<\/span><\/p><h3><b>Things To Consider Before Availing Inventory Financing:<\/b><\/h3><p><span style=\"font-weight: 400;\">The application approval of such financial products relies heavily on the appraised value of inventory. Therefore, borrowers must ensure a high value of their stock in the following ways.<\/span><\/p><ul><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Adopting measures to increase inventory\u2019s shelf-life.<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Efficient inventory management ensures minimal resource wastage.<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Providing accurate inventory details and sales records to reflect a well-organised stock.<\/span><\/li><\/ul><p><span style=\"font-weight: 400;\">Borrowers must keep in mind that they might expect surprise visits by lenders for inventory inspection. Opting for the above practices can only help them be adequately prepared.<\/span><\/p><h2><b>Types Of Inventory Funding<\/b><\/h2><p><span style=\"font-weight: 400;\">Borrowers can proceed with the mentioned application process and fulfil all requirements to avail any of the following types of inventory funding.<\/span><\/p><ul><li style=\"font-weight: 400;\" aria-level=\"1\"><b>Inventory Loan:<\/b><span style=\"font-weight: 400;\"> This is a one-time loan offered to businesses facing emergency financial crises. They can acquire this type of inventory funding on the basis of their pledged inventory\u2019s resale value, which they can then utilise for their immediate cash crunches.<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><b>Inventory Line of Credit:<\/b><span style=\"font-weight: 400;\"> Unlike the one-time applicability of inventory loans, the inventory line of credit is a continuous process. This financial product is used to meet the possible financial crises after a loan is availed. Here, lending institutions generally sanction a credit limit, from which borrowers can withdraw money as and when required. This mode of finance can act as a supporting source of cash.<\/span><\/li><\/ul><h5><b>Bottom Line<\/b><\/h5><p><span style=\"font-weight: 400;\">Companies struggling to get a traditional <a href=\"https:\/\/www.kredx.com\/business-loan\/\" target=\"_blank\" rel=\"noopener\">business loan<\/a> can benefit highly from short-term <\/span><b>inventory financing<\/b><span style=\"font-weight: 400;\">. That being said, this mode of funding may not be ideal for all types of businesses. Mostly, retail businesses dealing with substantial inventory that need to meet supplier demands can avail inventory funding to generate higher sales volumes.<\/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>Businesses built around selling products know the struggle of maintaining decent cash flow through and through. The availability of funds to meet these short-term financial crises can make or break a company, especially a small or new one. Inventory financing is an excellent way for companies to meet the demands of suppliers while helping their [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":7911,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[647],"tags":[648],"class_list":["post-7909","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-inventory-financing","tag-inventory-financing"],"_links":{"self":[{"href":"https:\/\/www.kredx.com\/blog\/wp-json\/wp\/v2\/posts\/7909","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=7909"}],"version-history":[{"count":5,"href":"https:\/\/www.kredx.com\/blog\/wp-json\/wp\/v2\/posts\/7909\/revisions"}],"predecessor-version":[{"id":15180,"href":"https:\/\/www.kredx.com\/blog\/wp-json\/wp\/v2\/posts\/7909\/revisions\/15180"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.kredx.com\/blog\/wp-json\/wp\/v2\/media\/7911"}],"wp:attachment":[{"href":"https:\/\/www.kredx.com\/blog\/wp-json\/wp\/v2\/media?parent=7909"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.kredx.com\/blog\/wp-json\/wp\/v2\/categories?post=7909"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.kredx.com\/blog\/wp-json\/wp\/v2\/tags?post=7909"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}