Inventory finance

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.

How does unsecured inventory finance work?

The "unsecured" part means that you don't need to provide security when applying for funding. Here's how it works:

• The lender pays your supplier
• The supplier ships the goods and you restock your inventory
• You sell your goods and repay the lender

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.

What are the benefits?

Here are a few reasons why unsecured inventory finance might be the right fit for your business:

• No security required. You are not required to declare your assets as security when applying for this loan. This is ideal for small businesses who need a quick solution to cash flow issues and don't want to put up property as collateral.
• Ideal for overseas suppliers. Shipping inventory from overseas can mean significant delays, especially if you have to put off paying your supplier. An unsecured inventory loan can expedite shipping, helping to eliminate unnecessary delays.
• Avoid using working capital. You don't have to dig into your working capital to unlock cash flow.
• Enhance your business profile. This solution can also help boost your business profile because you're able to take on bigger orders, which will increase your business capacity and maximise turnover.

What should I keep in mind before applying?

There are a few points to consider before applying:

• What is the nature of your inventory? Slow-selling inventory may not be ideal for this type of finance is you may not find a lender.
• What is your credit like? You will generally need good credit to be eligible for unsecured inventory finance.
• Are you confident in your inventory? Remember the lender has the right to inspect the inventory to ensure it's maintained its value and that you keep track of your inventory.
• How serious are you? As there is a lot of due diligence involved, a lender may make initial assessments and present a preliminary offer prior to a thorough review. You may be required to pay a due diligence fee before a final offer is made.

How to qualify for unsecured inventory finance

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.

• Time in the industry. Lenders usually require that your business has been trading for at least two years.
• Minimum annual revenue. You must show your annual earnings. Minimum earning requirements differ from lender to lender.
• Credit defaults. Defaulting on existing financial commitments shows lenders that your business is not in a position to take on another loan.
• Industry type. Whether or not a lender will approve a loan depends on your industry. If your business type is considered to be volatile or unpredictable, your application might be rejected.

What will I need to apply for inventory finance?

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:

• Balance sheets: Having accurate balance sheets for at least two financial years.
• Profit and loss statements: Having accurate profit and loss statements for the current and previous two financial years.
• Business tax return: Will help the lender assess the revenue history of the business.
• Personal tax return: If you are a sole trader or have recently started a business, this may be required by a lender.
• Current inventory list: An itemised list of all the inventory that is currently on hand.
• Inventory management records: These will help to show the lender how quickly inventory has turned over historically.
• Sales forecast: Well-constructed forecasts will help a lender assess the feasibility of invoice financing as an option for your business. You can compare invoice financing products below.

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Name	Product	Min. Loan Amount	Max. Loan Amount	Loan Term	Upfront Fee	Filter Values
Waddle Invoice Finance		$10,000	$4,000,000	From 1 month	$0		Apply to borrow up to $4 million against your unpaid invoices and receive your approved funds within 48 hours. Note: Only available to incorporated companies.	Go to site More Info	Compare	loading Fetching your data...
Timelio Invoice Finance		$10,000	$100,000,000	Up to 4 months	$0		Get up to 100% of the value of your invoices without having to wait for customer payments, and with no minimum turnover or operating history required.	Go to site More Info	Compare	loading Fetching your data...
ScotPac Invoice Finance		$10,000	$150,000,000	From 1 year	No set amount		Improve your business cash flow by financing your outstanding invoices. No minimum trading history required, but minimum 12 - month term and $10,000 in invoices.	Go to site More Info	Compare	loading Fetching your data...
ScotPac Selective Invoice Finance		$10,000	$1,000,000	1 to 3 months	$500		Finance your unpaid invoices on demand with terms of 1 - 3 months. 95% of invoice is paid upfront, with no minimum trading history required.	Go to site More Info	Compare	loading Fetching your data...
Earlypay Invoice Finance		$50,000	$15,000,000	From 1 month	No set amount		Access a revolving line of credit that grows in line with your accounts receivable. Funding available from $50,000 to $15,000,000+.	Go to site More Info	Compare	loading Fetching your data...
Octet Invoice Finance		$100,000	$10,000,000	1 month to 2 years	No Set Amount		Convert up to 85% of your company's receivables into cash flow. The value of your receivables need to be worth at least $250,000 to be eligible.	Go to site More Info	Compare	loading Fetching your data...
Earlypay Trade Finance		$20,000	$15,000,000	1 month to 15 years	No set amount		Get finance for 100% of your outstanding supplier invoices. Borrow from $20,000 to $15,000,000 with Earlypay.	Go to site More Info	Compare	loading Fetching your data...

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The due diligence process

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.

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