Inventory Financing

Inventory is an accounting term used for goods or products available for sale and raw materials that are used to produce goods available for sale. It may also be referred to all goods, items, products, produce, stock and materials kept by business owners to make profit by selling them in their respective markets.

Inventory Financing is an asset-backed loan facility that can be availed on the value of some or all of business’s inventory or stock. There is a percentage set by the lender or financial institution on which loan is granted, based on the business inventory’s value. The percentage set and the interest rate offered shall vary from bank to bank and depend on the volume of inventory. Inventory here serves as a type of collateral for the loan, making it a secured business loan . This type of financial facility is availed by entrepreneurs or businesses that own and manage large quantities of inventory. In some special cases, Inventory Financing is itself used to purchase inventory by retailers , traders, manufacturers or distributors.

The following entities are eligible to avail Inventory Funding or Loan against inventory:

Inventory Loan: It is simply a loan based on the value of the business inventory, wherein loan amount can be availed and used at once from the lender

Inventory Line of Credit: It is basically a credit limit sanctioned by the lender in which the borrower can withdraw cash, as many times depending upon the requirement but not beyond the total sanctioned limit. The interest rate shall be charged only on the availed amount from the total sanctioned limit.

Note: In both scenarios, the loan amount may depend on the inventory’s value and shall be sanctioned by the lender, based on the set.

Check- Which documents are required for business loan?

Factors a Bank Will Consider

Points to Remember

1. a) Few private and public sector banks and NBFCs hesitate to offer Inventory Finance, as they don’t want the load of collecting and keeping the collateral that is not useful for them, in case of any default from the borrower.
2. b) Any kind of inventory tends to depreciate over course of time. Therefore, the borrower may not be able to get a full loan against the 100% value of its inventory.

Apply for Inventory Finance

Just like business loans, working capital loans , and term loans; inventory finance can also be availed by checking, comparing, and picking loan deals from available lenders offering this type of loan. Financial institutions like private and public sector banks and NBFCs can be contacted to avail inventory finance.

Here, you can check and compare all the leading banks and NBFCs offering inventory finance. After filling in the basic required details, a respective relationship manager or customer care professional from the bank or NBFC will contact the applicant in the specified timeline to explain the deal and further process loan formalities. To online apply for this loan, customers can also visit the official websites of financial institutions offering Inventory Finance.