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Inventory Financing

Small and growing companies are often unable to get as much credit from their suppliers as they need. Suppliers may demand fast payments or may limit the amount of product that you can buy on credit terms at any given time. These conditions affect your ability to fulfill orders and can limit your growth opportunities.

If your company has too much money tied to its inventory or needs to purchase additional inventory, consider using inventory financing. Inventory financing is a form of asset based lending that allows you to leverage your existing inventory. It frees up funds that can be used to purchase additional inventory to handle growing orders or pay for ongoing business expenses.

We are a leading provider of inventory financing in Canada and can offer competitive quotes. For more information, fill out this form or call us toll-free at (877) 300 3258.

Who can use inventory financing?

This solution can be used by distributors, wholesalers and manufacturing companies that need funds to buy supplies or raw materials. To qualify for inventory financing, your company must:

  • Manufacture or re-sell products to commercial clients (no direct retail sales)
  • Have a reliable inventory tracking system that uses perpetual inventory
  • Provide reliable financial statements
  • Own marketable inventory
  • Need a minimum of $500,000 in ongoing financing

How does inventory financing work?

Facilities are usually offered in combination with an invoice factoring facility. This arrangement allows for a more cost-effective settlement and use of funds.

The line can be used to finance inventory soon after it has been acquired. It is structured to operate much like a line of credit. Funds are drawn from inventory as it accumulates and are then paid back once inventory is sold off as finished product to clients.

Inventory can be financed up to 80% of its forced sale value (or net orderly liquidation value). Your company gets the funds deposited directly to its bank account soon after submitting a draw request. Note that the forced sale/liquidation value of inventory is often lower than the market value.

Settlement happens once the product is shipped and the customer is sent an invoice. That invoice is then financed through the factoring line, and the proceeds are used to close the corresponding part of the inventory line. From that point forward, the transaction proceeds like a conventional factoring transaction that settles when the customer pays. To learn more, read “How Does Inventory Financing Work?

Advantages of inventory financing

This solution has a number of advantages, including:

  • It is easier to qualify for than bank financing
  • The line can increase as your sales increase
  • It enables you to leverage inventory
  • It can be used for finished product or work-in-progress

Due diligence

Getting an inventory line is easier than getting conventional bank financing, and the process takes a couple of weeks. During the due diligence process, we:

  • Review your company’s financial statements
  • Conduct a field exam
  • Conduct an inventory appraisal

Given the nature of inventory financing, there is a cost for conducting due diligence. The cost is based on the complexity of the transaction and is determined once we have had an opportunity to learn about your company.

Get a quote

We are a leading inventory financing company in Canada. To get a quote, fill out this form or call us toll-free at (877) 300 3258.

More information

To learn more about inventory financing, read:

  1. What is Invoice Factoring?
  2. How Does Factoring Work?
  3. Inventory Financing vs. Purchase Order Financing

Availability

We can offer inventory financing to companies in most Canadian provinces. For location-specific information, visit: