Your company carries it. You must finance it. We’re needless to say discussing inventory. Discussions with clients reveal a great deal of misconceptions around inventory financing in Canada. Let’s try to resolve some of these myths around the financing of one’s inventory, who the players are, who they are not ( that’s the most common myth ) and we’ll also try and provide some straight forward direction on next steps in your inventory financing challenge.
The overall quality of your inventory management will play a large part in your ability to finance your products, which are part of the current assets element of balance sheet. You cannot forget the importance that an inventory lender will put on your capability to report and count your products. The reality is that a lot of firms are either carrying a ‘ continuous’ or ‘ ‘periodic’ system of inventory control.
So here’s solid tip number 1# 1 – be aware that inventory lenders prefer a continuous type of inventory accounting, for all the obvious reasons. Essentially you are counting and monitoring inventory (by using software of course!) all the time. That’s a good thing with regards to a lenders valuation on a continuing basis and their ability to lend.
You’re company keeps growing. Unfortunately so is macropay review ! And that places an enormous drain on your cash flow. The working capital cycle dictates that cash turns into inventory which turns into receivables and we start around… that lag can be from 60 – 120 days, sometimes longer. Never underestimate the problem that higher sales will bring to your inventory financing needs.
Clients typically are seeking inventory financing because the degree of investment which you have in product and receivables drains your cash flow. As sales volumes increase your cash flow decreases based on your overall collection period of A/R not to mention those inventory turns.
Your sales staff needless to say never wants to be in a position to tell a customer you don’t have the merchandise they have worked so hard to sell.
Does your company have an inventory financing strategy? Nearly all firms we speak to in Canada, certainly in the small and medium business sector do not have access to the inventory financing they need. Do true inventory financing companies exist in Canada? We believe that the answer is generally ‘ no ‘, they don’t. However if your firm would consider a secured asset based lending scenario that in effect takes the place of inventory finance companies in Canada.
Under a secured asset based lending strategy your inventory is margined for what its worth, by experts who categorically know what its worth. You will improve your ability to finance your product if you have the controls, reporting, and inventory accounting system in places which makes the inventory and asset based lender ‘ comfortable ‘.
Speak to a trusted, credible, and experienced business financing advisor with regards to inventory financing companies and asset based lenders who’ll give your product the financing it deserves!