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As an emerging start-up CEO, you must know the complications of securing funds. Nearly 7/10 fail to scale in the absence of proper financial backing. On the opposite scale, seeking small business start-up loans is real pressure.

Given intangible business and revenue statistics, lenders are a little hesitant to provide loans. Moreover, businesses in the early stage do not hold enough wealth to ensure a reliable credit score. To lenders, it is a major turn-off.

In this situation, the individual business thinks it apt to shut down and build wealth first. They do so out of innocence. The businesses fail despite qualifying for operation. It is a serious circumstance. They failed because they were not aware of other loan options they had.

The blog talks about how an inventory loan/financing can trigger the growth prospects of a startup.

What does Inventory Financing Imply?

The shape and size of business finance are unique. Inventory financing is one of those. It is the credit obtained by a business to pay for future inventory expenses. Here the invoices serve as collateral.

The borrower pays the loan in monthly installments. One can pay it post-purchasing the inventory in lump sum. It is often used by young-stage businesses to maintain a sustainable cash flow. The loan is also helpful in meeting a huge demand.

An inventory loan is an ideal option for businesses lacking stellar credit scores and collateral. These are for those businesses that need to purchase inventory. Businesses might shift to personal loans for bad credit in the UK. But, in some cases, lenders require a personal guarantee as affordability proof. In this situation, inventory financing works the best.

Here, inventory serves as collateral. If you default, the lender may seize the assets.

What kind of Businesses should apply for an Inventory Loan?

Indeed, inventory financing takes away the hassle of engaging in complex loan structures and obligations. However, it is not ideal for everyone. This type of loan is ideal if:

  • high inventory turnover
  • You require access to additional working capital
  • Need inventories in bulk to cover peak trading periods
  • The business needs more types of flexible funding
  • To cover short-term cash crunch
  • To expand product lines
  • Need cash to meet rising customer demands
  • Lenders turned down the loan applications owing to credit score

New businesses lacking at least 6 months of operational experience may not qualify for the loan. Other reasons for non-approval may be:

High debt-to-income ratio (It is the ratio of the total revenue to total debts)

Having inventory that obsoleting in value

In any of these circumstances, lenders may consider the borrower risky and deny the loan.

What Lump-Sum Amount You Can Borrow Against Inventory?

Although, you can ask for an amount that equals the inventory costs. In other cases, some lenders offer only a percentage of the inventory value. The whole lending range may vary from 30-80%R depending on your financial circumstances, lender’s terms, and inventory type.

Generally, you get the Inventory loan within 2 business days. An inventory loan length might exceed from a few months to a year.

It is easy to qualify in place of small business start-up loans.

Before applying for inventory finance, evaluate the value of the stock you plan to sell. It is the best way to save yourself from defaulting on the loan. In case of default, you may lose your inventory to the lender.

What is the General Eligibility for Inventory Loan?

Lenders across the UK have unique loan conditions and eligibility requirements. In general, your business should meet the below criteria:

  • Should have a business operating history of at least a year. To qualify easily, you must have comprehensive sales history.
  • You must have a balanced inventory and financial record.
  • Must have a legal inventory process. They may ask for shipping reports, returned products, sales order receipts, and accounts receivable.
  • Any trace of bankruptcy, tax liens, and repossession may lead to disapproval.

5 Reasons Inventory Finance Helps Scale Startup’s Growth

Inventory financing, a type of asset-based lending, is the best way to cover urgent business costs. Here are some ways in which startups may benefit from inventory loans.

  • No Need for a Stellar Credit Score

As mentioned early in the blog, inventory financing does not require the borrower to have an excellent credit score. He may get the loan regardless of his credit score. Although, he will have to abide by certain terms and conditions for loan approval.

Apply if traditional lenders have turned you down in the past. You can also apply if facing credit score issues. You may not qualify for small business start-up loans. There is no point in losing hope. You can still meet your business requirements.

  • No Personal Guarantee Requirement

Businesses lacking a good credit history or struggling from a bad credit profile often struggle to get a loan. Whether it is personal loans or dedicated startup loans, lenders hesitate lending businesses. For a bad credit loan, one must provide a personal guarantee. It is the assurance from the borrower to pay the loan.

He may have to stake personal assets to get the loan. In case of loan default or non-repayment, the lender sizes the assets lawfully.  Personal loans for bad credit in the UK can prove helpful in most cases. It is because you can take it for any business requirement.

Before taking the loan, evaluate the circumstances and your financial well-being.

Inventory financing helps you avoid such stressful thoughts. It does not require any personal guarantee to qualify for the loan.

  • Easy and Quick to Secure

Personal loans generally take 2-4 days to qualify and receive money. At Londonloansbank, we prioritize customer concern and urgency.

You can get any loan here within the same day or the very next day of the weekend. There is less paperwork. For an agile start-up, time-constraints matter. It is the reason start-ups switch to inventory loan often.

Choose inventory financing if you share a time-sensitive requirement to use the money for your business and lack other options.

  • Optimize and Increase Cash Flow

A business requires sufficient and sustainable cash reserve to stay competitive. An Inventory loan provides this opportunity to business owners. If there is a high demand for your products, double manufacturing power.

These loans help you fund manufacturers on time. This way, you can avoid falling on payments and meet the resounding customer demand too. The revenue generated can be used to pay off debt. In the end, you may be left with more profit than the debt leveraged.

  • Increase Production Lines

If you wish to expand your product lines, inventory financing is the best way to achieve it.  Adding time-sensitive products to your portfolio can reach a wider audience. You will be left with more capital to attract new customers.

Bottom Line

With inventory financing, you can rationalize your dreams in every possible way. If you lose all your hope of securing credit, turn to an inventory loan. From stocking up products to getting discounts on bulk purchases, it works. If used wisely, businesses can optimize the existing structure and flood-in sales.

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