Get credit facility against inventory and avoid liquidity crunch under Inventory Financing. With Filecrat's network of banks and FIs you are assured of best services.
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Inventory financing is a solution for those who enjoy lower credit period from their suppliers/vendors and acts as an asset-backed financial solution to tackle business issues. The loan against inventory provides liquidity to buy new merchandise or even pay the employees in difficult financial crises. The security in this type of loan is the inventory of the borrower, which provides the lender full right to get hold of the inventory in case of failure by the borrower to meet his commitments.
Types of Inventory Financing
- Inventory Loan: In this situation a company requires immediate funds against the resale value of its inventory. This is a one-time loan offered to a borrower.
- Inventory Line of Credit: In this situation, the lender provides extra funds to the borrower in case of any requirement. The inventory loan helps the enterprise to take care of any unforeseen expenses arising after receiving the funds from the loan.
Benefits of Inventory Financing
- Quick Upfront Cash: In case of any financial emergency, this loan is very helpful as it requires less time for processing the loan. The loan is approved quickly and the funds can be used to pay off any emergency expenses.
- Improves Liquidity: This loan releases the cash otherwise locked in inventory and improves the cash flow which can be used to pay for business expenses, purchase machinery, dues of the employees and for many other purposes.
- Boost Company Sales: Turnover of the company plunges on account of deploying loan generated fund in increasing the current sales rate or in expanding the current business.
- Stocking up for Busy Season: The loan amount may be used to accumulate inventory during the lean season so that in the peak season, inventory is not an issue for the organisation.
- Additional Discounts: Improvement of the company’s liquidity status provides an opportunity to obtain a bulk /additional discount from the vendor on instant payment.
- Alternative to Traditional Loan: It is a favourable option for small business houses who finds it difficult to avail traditional loans. Subsequently, it helps them to flourish through the inventory Line of Credit.
- The minimum operational period of the business should not be less than 1 year with a commendable business credit profile.
- The CIBIL Score of the applicant should be satisfactory.
- The company must have steady sales history and engaged in a profit-making
- There must be a record of business sales wherein the inventory has been turned to cash regularly.
- Inventory Management should be as per the industry practice.
- The list of inventories of the company should be large and show high demand and turnover.
- No major credit violation records should be available against the company.
STEP 1: We check the features and procedure of loan of banks/other financial institutions and visit/directly consult the bank for any queries before selecting the Bank/other financial institution as per your requirement.
STEP 2: After selecting the bank, we help the applicant in filling the loan application form and attach the required documents.
STEP 3: The bank will evaluate the submitted documents and will proceed with the valuation of the stock.
STEP 4: After all the evaluations bank will send a sanction/approval letter and initiate processing of the offer letter.
STEP 5: Legality of the documents will be checked by the bank.
STEP 6: A technical inspection and estimation will be done by the bank.
STEP 7: Signing of the loan agreement and disbursal of the amount.
- Consultation with our Loan Advisor
- Complete Assistance in Paperwork
- Fast loan Disbursal
- Copy of PAN (Permanent Account Number)
- KYC of the Applicant
- Company’s registration certificate
- Bank Statement of the Account Associated with the Business for a specified duration (past six months)
- Cancelled Business Cheque
- Financial Statements for the last 2 years
- Income Tax/ GST Return Documents for recent years
- List of Inventory along with its value
- Copy of Sale Invoices of the Company Inventory
- Two recent passport size photos of applicant or co-applicant
- Appraisal Report
- Collateral Documents (if any)
- Any other required documents
Generally, the interest rate for an inventory loan is higher than other traditional loans and is different for every bank/financial institution depending on various factors.
Institutions such as banks, NBFCs, and Digital NBFCs provide inventory loan.
There is no fixed period as it varies for every institution as per the situation but generally, it is as per the need of the business of the borrower.
Inventory in hand is verified and valued to provide 60-80% of the inventory value as loan.
The loan tenure is determined by the type of loan as in the case of a line of credit, the borrowing limit is derived from the periodic stock statement submitted.