Your enterprise carries it. You have to have to finance it. We’re of course talking about inventory. Discussions with customers reveal a lot of misconceptions about inventory financing in Canada. Let’s attempt and resolve some of these myths about the financing of your inventory, who the players are, who they are not ( that’s the most prevalent myth ) and we’ll also try and supply some straight forward direction on subsequent actions in your inventory financing challenge.
The general high-quality of your inventory management will play a huge portion in your ability to finance your merchandise, which are a element of the existing assets element of your balance sheet. You can not overlook the significance that an inventory lender will spot on your potential to report and count your goods. The reality is that most firms are either carrying a ‘ continuous’ or ‘ ‘periodic’ program of inventory control.
So right here is solid tip # 1 – be aware that inventory lenders favor a continuous kind of inventory accounting, for all the apparent factors. Primarily you are counting and monitoring inventory (with the use of software of course!) at all occasions. That’s a fantastic factor when it comes to a lenders valuation on an ongoing basis and their potential to lend.
You’re enterprise is growing. Regrettably so is your inventory! And that areas a big drain on your money flow. The operating capital cycle dictates that cash turns into inventory which turns into receivables and then we get started all over… that lag can be anyplace from 60 – 120 days, sometimes longer. In no way underestimate the issue that larger sales will bring to your inventory financing desires.
Consumers generally are searching for inventory financing for the reason that the level of investment that you have in product and receivables drains your money flow. As sales volumes raise your cash flow decreases based on your general collection period of A/R and of course those inventory turns.
Your sales employees of course in no way wants to be in a position to tell a consumer you don’t have the solution they have worked so really hard to sell.
Does your corporation have an inventory financing strategy? The majority of firms we talk to in Canada, undoubtedly in the smaller and medium organization sector do not have access to the inventory financing they will need. Do accurate inventory financing organizations exist in Canada? We feel that the answer is frequently ‘ no ‘, they do not. Having said that if your firm would contemplate an asset primarily based lending scenario that in impact takes the location of inventory finance businesses in Canada.
Under gold etf based lending approach your inventory is margined for what its worth, by authorities who categorically know what its worth. You will boost your ability to finance your product if you have the controls, reporting, and inventory accounting system in locations that tends to make the inventory and asset based lender ‘ comfortable ‘.
Speak to a trusted, credible, and seasoned company financing advisor with regards to inventory financing businesses and asset based lenders who will give your solution the financing it deserves!