Your business carries it. You want to finance it. We’re of course talking about inventory. Discussions with customers reveal a lot of misconceptions around inventory financing in Canada. Let’s attempt and resolve some of those 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 give some straight forward path on subsequent actions in your inventory financing challenge.
The all round high quality of your inventory management will play a large element in your capacity to finance your products, which are a component of the present assets element of your balance sheet. You can’t overlook the significance that an inventory lender will place on your ability to report and count your solutions. The reality is that most firms are either carrying a ‘ continuous’ or ‘ ‘periodic’ technique of inventory control.
So here is solid tip # 1 – be conscious that inventory lenders choose a continuous kind of inventory accounting, for all the clear factors. Essentially you are counting and monitoring inventory (with the use of software of course!) at all occasions. That is a great thing when it comes to a lenders valuation on an ongoing basis and their capacity to lend.
You are organization is increasing. However so is your inventory! And that locations a big drain on your money flow. The functioning capital cycle dictates that money turns into inventory which turns into receivables and then we begin all over… that lag can be anywhere from 60 – 120 days, in some cases longer. Never underestimate the problem that higher sales will bring to your inventory financing wants.
Clientele normally are hunting for inventory financing for the reason that the level of investment that you have in product and receivables drains your cash flow. As sales volumes raise your money flow decreases primarily based on your all round collection period of A/R and of course these inventory turns.
Your sales employees of course under no circumstances desires to be in a position to inform a buyer you don’t have the item they have worked so difficult to sell.
Does your corporation have an inventory financing method? manage subscriptions of firms we speak to in Canada, certainly in the smaller and medium company sector do not have access to the inventory financing they have to have. Do accurate inventory financing corporations exist in Canada? We feel that the answer is generally ‘ no ‘, they do not. However if your firm would think about an asset primarily based lending scenario that in impact takes the location of inventory finance providers in Canada.
Under an asset primarily based lending technique your inventory is margined for what its worth, by authorities who categorically know what its worth. You will boost your potential to finance your product if you have the controls, reporting, and inventory accounting technique in locations that makes the inventory and asset primarily based lender ‘ comfy ‘.
Speak to a trusted, credible, and knowledgeable organization financing advisor with regards to inventory financing businesses and asset primarily based lenders who will give your solution the financing it deserves!