3 Questions to Ask Potential Inventory Financing Companies

Last Updated on January 12, 2018

Inventory financing is essentially a line of credit that uses current inventory as collateral to lower the cost of borrowing, and free up capital that can be used more effectively and profitably.
If you’re considering inventory financing, then one of the most important things to keep in mind is that not all inventory financing companies have the same policies and procedures. To help you choose a trusted partner — which is one that will lean forward and be part of your success story — here are 3 critical questions to ask:  

question mark about inventory financing companies

3 Questions to Ask Potential Inventory Financing Companies

  1. How long will it take you to access the financing? Some inventory financing companies take months to assess applications and, upon approval, transfer funds into your account. Simply put: don’t accept this. Choose a financing partner that is committed to assessing your application within days, and transferring 100 percent of the agreed-upon funds within a week or two.
  2. What happens if your credit score is impaired? If you’re seeking inventory financing from a bank, then having impaired (i.e. bad) credit is typically a deal-breaker. This is because banks’ Asset-Based Lending divisions usually require evidence of positive Earnings Before Interest, Taxes and Amortization (EBITDA) and/or free cash flow (which is EBITDA less debt service and capital expenditures).However, if you’re working with a private inventory financing company, then impaired credit is unlikely to be an obstacle. This is because these firms do not require positive earnings before interest, taxes, depreciation, and amortization, but instead focus on the value of the collateral (i.e. the inventory itself).
  3. Can I use the financing for any recapitalization purpose? Banks typically impose restrictions and covenants on how asset-based lending can be allocated. However, most private inventory financing companies have no limitations. As such, you can use the financing for any recapitalization purpose, such as for covering seasonal demand surges, expanding into new locations, purchasing equipment and technology, buying out shareholders, taking advantage of supplier discounts, and so on.

Learn More

To learn more about inventory financing, contact the National Business Capital & Services team today. Or if you’ve decided that inventory financing is the funding solution you need — and that National is the trusted partner that you want on your team — then complete our secure online application (which typically takes up to 5 minutes).
Inventory financing is one of the ways to take advantage of a profitable opportunity so your business can turn smart investments today into tomorrow’s substantial profits. If you’re ready to identify these opportunities and learn how business funding can grow your business, download our FREE eBook “7 Profitable Opportunities That You Could Miss Without More Business Funding“.
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About the Author, Megan Capobianco

Megan is passionate about helping business owners along their journey - providing them with relevant content they can use in their day-to-day operations.

Disclaimer: The information and insights in this article are provided for informational purposes only, and do not constitute financial, legal, tax, business or personal advise from National Business Capital & Services and the author. Do no rely on this information as advice and please consult with your financial advisor, accountant and/or attorney before making any decisions. If you rely solely in this information it is at your own risk. The information is true and accurate to the best of our knowledge, but there maybe errors, omissions, or mistakes.