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Relying on your cash flow to obtain products from overseas suppliers can cause unnecessary stress. This is where unsecured inventory finance comes in.
Unsecured inventory loans are designed to pay your supplier directly on your behalf, allowing you to meet your financial obligations while keeping your shelves stocked and your business's reputation intact.
The "unsecured" part means that you don't need to provide security when applying for funding. Here's how it works:
Funding is usually granted with a director's guarantee and, depending on the lender, you can apply for up to $1 million. The repayment period is determined by how long it would take to sell your inventory.
A shorter loan term may mean a higher interest rate, but if it's a small amount, it makes financial sense to repay quickly. Paying interest on a small loan over a longer period will eat away at profits.
Generally, unsecured inventory finance is used by manufacturers of consumer products and auto dealers that have money tied up in inventory. Usually, the business will be ordering from overseas suppliers, causing a delay between paying the supplier and receiving the goods. This causes cash flow issues.
Here are a few reasons why unsecured inventory finance might be the right fit for your business:
There are a few points to consider before applying:
Lenders want to see that you're able to make repayments, so you need to prove that your business is in decent shape financially. While you don't have to put up collateral for an unsecured inventory loan, your business must meet a few criteria.
While this will vary from lender to lender, it is a good idea to collect and assess the following documents prior to applying. There is a good chance that inventory finance lenders will want to look at:
Along with reviewing the above documents, a lender may want to send an independent auditor to your business. This is in order to ensure that inventory financing is a good solution for your current operations and to mitigate their risk.
Unsecured inventory finance can be a convenient option to keep your business moving, but make sure you compare your loan options before you apply to ensure you get the right financing for what your business needs.
Picture: Shutterstock
A UCapital unsecured business loan can provide up to $300,000 without security, with repayment terms between 3 and 12 months.
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