Stock finance is a lending facility which allows businesses to access working capital that is tied up, by borrowing against the value of the stock owned by your company. This stock can be comprised of both finished goods and raw materials.
Stock finance, which is also sometimes known as inventory finance, works by lenders purchasing stock from a seller on behalf of the buyer. One of the main benefits of stock finance is that it can be used on a UK, European and even international basis. This type of funding is also particularly useful for those in the retail, wholesale and international trade industries as it can help to smooth cash flow for those companies whose trade is seasonal.
While stock finance can be used as a funding tool in its own right, it is more common for it to form one part of a wider portfolio of lending options. Stock finance tends to be used as a 30 to 90-day revolving facility to enable access to cash as and when a business needs it.
As with many types of asset financing, the exact amount you will be able to borrow will depend on the level of stock you are currently holding – typically the greater the level of stock, the greater the amount of money will be available to you. It is common for lenders to request a stock valuation to be carried out by an independent third party before any agreement is finalised. The chance of being able to secure such a funding arrangement will depend on the type of stock you hold and also how established and creditworthy your company is seen to be.
Once the lending facility is in place, you will be required to provide the lender with your monthly or weekly stock inventory; the level of funding provided to you will be based upon those stock values and will, therefore, increase or decrease accordingly.