Your Firm is not in the service sector. They are the ones with regard to inventory financing – . Unlike your company, which conveys inventory to fulfill customer purchase needs your services and produces goods companies do not have any storage requirements. If your company has an investment in inventory then financing for that advantage is frequently, if not necessarily, vital. Funding via bank credit lines to your balance sheet’s stock component is difficult, or even in some cases impossible. Most business owners and financial managers understand that of both important current assets receivables and inventory that banks prefer receivable funding.
Do you fund your Inventory, and what are the requirements to get a facility? The truth is your company will have different sorts of stock and that each and every company is different – they are work in progress, raw materials, and finished goods. What’s ABL is your question our customers ask. The acronym is, and stands for asset based lending. Facility sizes tend to vary from 250k and up, since it is not really economical for parties you and the creditor for fund amounts much under that. Your ability to control, Buy inventory efficiently, and report are drivers in a stock financing choice. Your ability stock to track, and create and bill and collect are the requirements for an inventory facility. We would point out that in many cases this facility also has a receivable part, because, as we all known, stock flows into a lien that flows into dare we say it money.
If you cannot finance your inventory correctly you can get into what can best be describe as a’ money trap’- and that is not a snare. Typically each one million dollars of stock on hand can cost you between 150 and 250 dollars per year when you take into consideration some obvious and not so obvious aspects such as funding costs, storage, handling, insurance, and corrosion of the stock which by its requirement forces you to perform an asset write down. The irony is can have little or stock, it is a balance act. When inventory is arranged by you financing you want to be certain you have levels of product – so you will need to concentrate on purchase prices and both financing price.
If you have inventory financing fast efficient turns are more possible and you annual carrying costs can be dramatically reduced- do not forget that the money you invest in stock can be put to work elsewhere and oftentimes earn, by way of instance, at least 12 percent more in earnings. That is a number for a producer. Financing inventory is a challenge you need to have the ability while satisfying customer order requirements to benefit from volume discounts, but limit your investment. Whew. That is a teeter totter do not you think?