Stock finance has been designed to enable companies to secure business finance against their working capital or goods. In essence, a business that holds stock can extract its value and then secure funding to purchase extra stock or facilitate new growth initiatives.
Stock finance can also be known as inventory finance and is an asset-based funding solution. It doesn’t matter whether the stock is considered a raw material, a component, or a finished product – as long as it holds value then it can be used within this type of finance agreement.
Typically, a business will use stock finance to help with overstocking, this could be due to the benefits of cost savings through bulk purchases or in preparation for high sales volumes. This funding can also be used during quieter times where a boost in cash flow is needed to help navigate seasonal lows where sales levels are low.
When agreeing to a new finance contract of this type a lender will request that the stock is valued by an independent company so that the correct value can be ascertained, to ensure that any funds being provided are accurate.
Often stock finance is a short-term solution but is also flexible so once the process is agreed new finance agreements can swiftly be put in place. Companies could require this set-up on a weekly basis, a monthly basis or a longer period. As long as the business continues to need stock and can maintain their repayments then the contract can run and run on a rolling basis.
Some of the most common items that are purchased as a result of stock finance include:
- Electrical and IT equipment
- Lighting and furniture
- Raw materials
- Agricultural products
- Cars and commercial vehicles
The key benefits of stock finance are:
Flexible – it can be used for both domestic and international businesses enabling the funding of stock, components and raw material without having a negative affect on business processes or operations.
Revolving – the finance agreement is available whenever it is needed. A business can control when they use the facility accommodating for both sales highs and sales lows.
Transparent – there are no hidden costs or early repayment charges, the costs are very transparent and are only based on the amount of funding that is required.
Fast – funding from £50K to £300K can be quickly enabled and once approved payment can be established in as little as 1 to 2 days.
One of the most popular industries for stock finance is car sales. A dealership will be approved with an agreed credit limit which they can draw down funds and then purchase vehicles which become stock. Upon the sale of the stock, the finance is repaid and the process can start again. Our team of finance specialists have recently helped with securing a credit facility of £125K for vehicle stock and a similar facility for £200K for some high-end vehicles.
If you have any questions or would like to know more about the benefits of stock finance, please call us on 01993 706403 or e-mail enquiries@ngifinance.co.uk.
Leave a Reply