Inventory Loans

Increase profits and customer satisfaction with an inventory loan from Iruka Capital.

Home / Business Loans / Inventory Loans

As a business owner, your goal is to keep customers happy. That means having full shelves stocked with the products they know and love. Sometimes the best way to do this is with an inventory loan. Often, it’s your best move to boost your inventory and customer satisfaction.

In the U.S., 51 percent of business owners take out loans to bolster their inventory. These inventory loans can be especially helpful when business owners can buy merchandise at a discount. Whether you are a small business owner looking to expand or simply interested in inventory financing, consider this your guide to inventory loans.

What Are Inventory Loans?

While a retailer typically has enough capital to cover stock orders, inventory loans are there when they need assistance. These short-term business loans provide a business owner with working capital to buy more inventory. The proceeds from the loan then serve as collateral to secure inventory financing.

Put another way, the loan gives a small business sufficient capital to buy inventory in bulk. The business can then repay the loan using the earnings from the purchased goods. It’s worth noting that there’s an interest rate on top of the loan that depends on the borrower’s credit history and the terms of the loan.

Does My Small Business Need an Inventory Loan?

There are a variety of circumstances where leveraging inventory loans makes sense. For instance, this injection of capital is a good fit for businesses that need to keep large amounts of inventory in storage or warehouses. Loans help ensure they always have merchandise on-hand and can save money by buying in bulk.

Taking out a loan also makes sense during busy seasons. For example, you might have a product that consistently sells out during certain times of the year. Inventory financing ensures you have enough merchandise to go around for the next seasonal rush.

How Do I Qualify for an Inventory Loan?

There are a variety of factors that affect whether you get inventory financing. Lenders want to make sure they get their money back on the capital they invest. They are more likely to invest in established companies with strong track records of success. Having no credit defaults helps too.

How Do I Get an Inventory Loan?

You’ve made up your mind. You want to extend your line of credit and strengthen your inventory. Here are the steps you need to take to secure an inventory financing:

  1. Prepare Business Financial History for an Inventory Loan Application – Lenders want to know you are qualified for an inventory loan. That’s why it’s critical to have a strong grasp of your company’s financial records. Make sure to go through the financial history of your business to understand your assets, debts, profits, and future projections.
  2. Submit a Business Loan Application to a Lender – Different lenders have different strengths and weaknesses. Find one that best matches your needs. For instance, you will want to consider the different types of inventory financing lenders offer before submitting your application. A lender may require a third-party audit at this time too.
  3. Getting Audited – If a lender likes your application, they will contact you. Many lenders will ask for a preliminary loan agreement to avoid wasting time and money if the borrower backs out. You will also be asked for an audit of your business field. For this, you will meet with a representative to see if the loan makes sense for both parties.
  4. Accepting the Terms of the Loan – You will probably have a good idea about the viability of your application at this point. If your application is accepted, you will have your extra capital in a matter of days. Inventory financing is a great opportunity, not just for your bottom line, but also to avoid using working capital and enhance your business reputation.