Small businesses may need a considerable amount of capital to fund their daily activities as well as their expansion and development plans. Applying for small business loans through a traditional lender is one option, but many small businesses unfortunately do not qualify for traditional loans because of a lack of collateral. If you have been turned down for financing through a traditional lender, you may be wondering what your options are. Small businesses that have inventory in their possession may be able to use inventory financing to generate the funds they need. There are several different types of inventory financing loans available to consider.
With a blanket inventory loan, the inventory that your small business keeps in its possession on a regular basis becomes the collateral for the loan. This type of loan is most commonly extended to businesses that have expensive inventory that does not sell very quickly, such as jewelry or other high-end items. In some cases, the working capital provided by blanket inventory loans enables the businesses to keep their inventory in stock as needed, but the loan funds can be used for other purposes as well.
Floor Planning Financing
With floor planning financing, the inventory is also used as collateral for the loan, but it is unique from blanket loans. With floor planning financing, which is also termed trust receipts, the inventory is held in trust by the business on behalf of the bank. As the inventory sells, the business pays the lender according to the terms of the financing. This type of financing is common with small automotive dealerships and others with expensive inventory that does not sell quickly.
Field Warehouse Loans
Lenders that offer inventory business loans often prefer field warehouse loans because they are the most secure type of financing for the lender. With this type of loan, the small business’s inventory is stored in a warehouse that is secured by the bank or by a third party affiliate working for the bank. As the inventory is sold, the bank receives a payment from the small business, and the inventory is released from the warehouse. While this is a popular option, it is rather expensive and may not be the most ideal for the small business in some cases.
Inventory financing is an alternative type of financing that is available for small businesses to consider if they have inventory. Typically, these are most well-suited for those that have expensive inventory that does not sell at a rapid pace, but there are alternative forms of these loans that may be suitable for other types of inventory. Keep in mind that this alternative type of financing may be more expensive to use than a traditional bank loan, but it nonetheless will provide you, the borrower, with the financing needed to continue on with business operations and goals.
If you’d like to know more about how we can help you get money for your business, call us for a FREE Business Funding Consultation at (800)416-7713.
Rick Anderson @FundingExpert1
Rick Anderson is the CEO and Senior Small Business Funding Specialist with Small Business Money Solutions. A company that helps small business owners and self employed professionals get the financial solutions they need to GROW and thrive. Rick has been in business for over 22 years, and his company has helped 22,485+ small business owners and counting. Rick has also written a book on small business finance entitled 10 Easiest New Money Sources For Ubsiness Owners.
Connect with him https://www.linkedin.com/in/RickAndersonSmallBusinessLoans or if you would like to ask him a question, send it to [email protected] If you’d like a FREE ‘Business Funding’ Consultation, call him at (800)416-7713.