What is Inventory Financing?

December 10, 2019 Published by Amanda Lindberg

Defining Inventory Financing

Inventory financing is a form of asset-based lending, such as a revolving line of credit or a short-term loan, used to fund inventory purchases. The service is primarily utilized by businesses that are required to pay suppliers before selling product to their customers. While the line of credit or loan is active, the purchased inventory serves as collateral for loan security if the loan cannot be repaid.

Why should I finance my inventory?

Inventory build-ups restrict large sums of capital for long periods of time. If your company self-funds its inventory, your product carrying capacity may be limited, which hinders growth potential. Moreover, inventory continues to incur costs through inbound transportation and storage/handling fees.

Financing your inventory enables you to meet the needs of your customers while also growing your business through strategic initiatives. Consider utilizing this service if you need any of the following within your operation:

  • A cost-effective source of capital for strategic business initiatives
  • The ability to store your inventory for a certain amount of time before selling it
  • A reduction of your working capital without decreasing your inventory
  • Locked in favorable prices to minimize the impact of commodity price volatility

An inventory financing provider will help you address these needs so you can direct cash back into your business. Not all inventory financing services are created equal, however, and it’s important to thoroughly evaluate all available options so you can select the best solution for your business. Items to compare when determining the most cost-effective choice include advance rates, interest rates, fees, and restrictions.

WOW Logistics® Inventory Financing Solution

The WOW COMMODITY PURCHASE PROGRAM®, WOW Logistics’ inventory financing service, eliminates the need for you to use your internal capital to fund inventory. We purchase inventory at 100% of its value, as opposed to the 60% advance rate offered by most banking institutions. We require no upfront equity or monthly payments, including storage and handling costs, until your product sells and ships. Our solution also offers you the ability to flex up and down matching inventory build-ups with no non-use fees or long-term commitments.

The WOW COMMODITY PURCHASE PROGRAM is just one service within WOW Logistics’ integrated supply chain service offerings. We also offer solutions focused on warehouse operations, transportation brokerage, and real estate development.

Learn more about WOW Logistics by exploring our website.