Inventory loan uses your inventory to secure a loan.
Inventory loan financing (also known as “Flooring”) is the leveraging of inventory using the value of the financed equipment or stock as collateral for the loan. Lenders want to make sure their loans are secure, so this method will improve the chances of getting financed drastically.
Inventory loan financing is a method commonly used when a distributor or reseller needs additional credit and payment terms longer than 30 days in order to maintain a complete stock of inventory for immediate customer availability. Lenders and savvy business people realize that running out of inventory will do nothing, but drive customers away from a business. That is why more and more lenders are willing to allow a business to use their current stock of inventory as collateral for future loans.
A benefit of using this sort of loan is the increased credit capacity based on security in financed inventory/equipment. It also allows distributors and resellers to stock inventory with extended payment terms. Working capital position for the business is also increased. Another extremely important benefit is that it does not count against the customer’s credit line.