What is Inventory Financing and Why is it Important?

April 3, 2023
Updated on

Inventory is one of the most crucial elements for a small business. Effective inventory management can help you meet your consumer demand and maintain the company’s overall cash flow. However, even successful small businesses can experience seasonal cash flow concerns due to reasons like pending invoices, sudden equipment malfunction, and a dip in sales figures. 

During a financial crunch, wholesalers, retailers, and seasonal businesses that rely heavily on working capital can find it challenging to maintain their inventory and incur heavy losses as a result. In such situations, getting a business loan to cover the costs of refreshing or restocking your inventory is often considered the best solution. But what is inventory financing? How does it work? And how is it useful for small business owners?

Inventory Financing: Explained

Also known as an inventory loan, inventory financing is a form of a working capital loan. These short-term loans enable business owners to buy adequate stock for their business. In certain cases, the purchased inventory acts as collateral for the acquired loan. However, Kinara Capital offers collateral-free inventory financing for small businesses on flexible terms. 

Inventory financing qualifies as a productive solution for existing small businesses that have an established record of inventory transactions. Moreover, it is better suited for product-based small businesses rather than service-oriented enterprises that do not have physical inventory.

How Does Inventory Financing Work?

Inventory financing can help your small business get the required funds at the right time. Kinara Capital’s working capital loan is disbursed in just 24 hours, allowing you to purchase your stock and make the most of every business opportunity.
For seasonal business owners, a loan can help in maintaining a good amount of inventory before the peak season starts. A fully stocked inventory can ensure that your business never fails to meet the consumer’s product demands.

The Advantages of Inventory Financing

Here is a detailed look at how inventory financing can benefit your small business:

The display units are stocked:

A retail store needs products on display, regardless of whether you’re selling online or offline. The words ‘out of stock’ can instantly prompt a customer to take their business elsewhere.  Inventory financing makes sure that your enterprise is capable of completing every order, and that you never lose a customer. 

Lifeline for seasonal businesses:

Another great benefit of inventory financing is that it can support seasonal businesses to prepare for a surge in sales when the time is right and demand is high. 

Grow your MSME with collateral-free business loans

A boon for wholesalers:

If you’re a wholesaler, you would understand the need to buy inventory in bulk. However, placing such orders can get really expensive. Inventory finance can be a real boon for wholesale businesses as it can ensure a well-stocked warehouse or shop with all the required items. 

No cost-cutting:

One of the most important benefits of acquiring an inventory loan is that it doesn’t require you to cut costs from other business operations to meet your inventory demands. Small business owners can make sure that buying inventory causes no disruptions to their business operations. 

When Do You Need Inventory Financing?

Micro-small-and-medium enterprise (MSME) owners can consider opting for inventory financing in the following scenarios:

  • Your business has a high inventory turnover rate.
  • Your seasonal business requires external funding to stock the inventory for a predicted surge in sales.
  • You wish to free up some working capital to be used for other operating expenses.

The Role of Kinara Capital

We promote financial inclusion for small business entrepreneurs by providing collateral-free working capital loans to MSMEs. Small business owners can seize all opportunities for business growth by using the disbursed amount to effectively manage their inventories, renovate their business premises, meet all general business expenses, and more. 

So, don’t keep your business from realizing its full potential. Reach out to Kinara Capital today!

You may also like