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Do you know the benefits of Inventory loan?

16 April, 2018

Just as ignorance is bliss, many entrepreneurs are not aware of the advantages or benefits of inventory loan. Many are not even aware that there even exists a loan for inventory, as business loans are more hyped and catered to.

An inventory loan is one which is borrowed by keeping the goods to be sold as collateral, such that, if the loan is not repaid through the selling of the goods, the lending company can actually take away and keep the goods with them. Such loans are short-term in nature and have shorter durations for repayment.

Some of the benefits of inventory loan are:

  • Helps in investing in other aspects of business other than stock and inventory. Thus, one may eliminate the difficulty of investing in aspects of business other than stock or inventory, that is rent, wages or other related liabilities in the order.

 

  • Also, if a particular inventory loan suits a particular borrower, then there is an added advantage for the borrower to convert the loan as recurring credit and minimize interest rated upon the loan taken or borrowed.

 

  • Inventory loan also enables a particular shop or studio owner to keep the collection or variants ready, such that the goods are sold, and the business does not run into losses. As also, the shop or studio does not turn into out of stock mode often and thus lose its valuable customers, which are prime for the running of the business.

 

  • Inventory loan comes into picture for small sized businesses which lack the turnover or criteria for qualifying for a certain bank loan. This loan also comes in handy for enterprises which may lack documents or credibility as laid down by the norms of the banks for qualifying for their loans.

 

  • Inventory loans enter into the category of secured loans, hence the lenders have zero risk in lending and borrowers can easily borrow by pledging their stock as collateral in the agreement. Hence, minimizing the risk of repayment of the debt given to the debtors by the lending firms or companies.

 

  • Inventory loans are short-term loans, hence they provide the ability to the borrower to repay after immediate sales, hence eliminating long tenure waiting period for the borrower. Thus, the borrower can get rid of the liability faster and quicker as compared to that of a traditional bank or long term loans.

 

  • There are specific industries to which this loan caters to, namely retail studios or stores, wholesale entrepreneurs, or even hoteliers. Thus, it is profitable for the lender as well as the borrower as to learn from their competitor’s gain or losses and not repeat the same while acquiring an inventory loan or while repaying the same in the given term.

 

  • Inventory loans are comparatively easier to acquire as to that of long-term or bank loans, and hence, a certain borrower who is sure for its inventory or stock’s performance in the market applies and acquires the loan.