business loans

5 Tips on How to Qualify for Inventory Business Loans

Inventory business loans can be a good financing option for small- to medium-sized businesses, especially those belonging to the retail and wholesale industry. One reason for this is that product-based businesses typically require enough inventory to meet their customers’ demands. Lack of inventory, on the other hand, could decrease sales and cause cash flow issues.

An inventory loan is a financing option that provides working capital to businesses looking to purchase inventory. Depending on what the lender and business owners have discussed, inventory loans can be structured in two ways – a term loan or line of credit. Both of which are viable options for small business owners. Furthermore, business owners often use inventory loans to take advantage of bulk discounts and seasonal sales.

It’s easier to qualify for inventory loans than traditional bank loans since you don’t have to put up additional collateral. The inventory you’re going to purchase serves as collateral to secure the loan. Even so, this does not guarantee approval. It’s worth noting that the lenders will consider various factors before deciding on the loan approval. It includes your business history, inventory records, financial statements, and more.

The following tips will help you increase your chances of approval when you apply for an inventory loan.

1. Think Like a Lender

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You can use inventory financing in two ways: to boost your working capital or buy additional inventory that you’ll sell. Since the inventory purchased serves as collateral, lenders can repossess the goods in case you fail to meet the required repayments. This minimizes the risk lenders take when they approve your loan. If you default on the loan, lenders will most likely sell your inventory to make up for the loss.

When you apply for an inventory loan, the lender considers two things: your credit score and your inventory value. If your collateral is not as valuable and marketable, lenders will closely examine your credit score. Conversely, if you pledge valuable collateral, then the lenders won’t scrutinize your credit rating as much.

As you apply for inventory business loans, put yourself in the lender’s shoes. Position your company in a way that’s attractive to lenders.

2. Follow and Meet the Necessary Requirements

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As mentioned, lenders greatly consider the type of inventory you’re purchasing when assessing your loan application. There’s a lot of thought that goes into a loan application assessment. Lenders take their time to conduct due diligence and examine your application. For this reason, some lending companies have a minimum borrowing amount that’s usually higher than other types of loans. In fact, with meticulous research, you might find some lenders that can offer as high as $500,000.

This amount may be more than what small businesses could handle. That said, it’s crucial to assess whether inventory financing would be able to meet your business’ needs before fully committing to the application process. To know how much you qualify for or if you have other questions and concerns regarding inventory loans, you can consult with a financial expert in your area.

3. Business History – at Least a Year

In order to qualify for an inventory loan, you need to provide previous financial and inventory records for lenders to evaluate. Lenders usually don’t work with new companies because they haven’t established enough business history to guarantee their repayment capabilities. Companies looking to apply for inventory financing should have at least one year of operational time behind them (three or more is ideal) to boost their chances of being approved.

4. Present an Organized Projected Sales Details

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Financing companies will want to see a complete breakdown of your business’ projected sales to know more about what they’re investing in. So, be sure to present one in an organized and detailed manner. Your projection analysis will demonstrate that you’ve invested a lot of time and effort into planning your inventory financing application. If you don’t know how to project sales accurately, you can always hire someone who has the know-how to do it for you.

5. Give Lenders Detailed Inventory and Financial Documents

When applying for an inventory loan, the financing institution will look at your inventory and financial documents. Therefore, you must have them ready to submit during your application. Specifically, the lenders will examine your company’s profit margins, inventory turnover, and sales volume. They might also look at your history of inventory losses and damages, including how you handled the situation in the past.

As mentioned by Founderjar, it’s always best to use inventory software to keep things organized. If you use an inventory management system or an accounting application, you won’t have a hard time compiling these documents. But if you don’t have a complete record, it will be challenging to find a lender who will approve your loan.

Why Apply for Inventory Financing?

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Taking out a loan – whether inventory financing or term loans, it’s always advisable to consider whether the benefits outweigh the disadvantages.

According to SMB Compass, here are the benefits of applying for inventory financing:

1.   Free up cash tied up in inventory

With inventory financing, you get to free up cash tied up on your inventory, giving your company’s cash flow a boost. With more money to spare, you can take on more business projects or initiatives like meeting day-to-day expenses, product expansions, and more.

2.   No additional collateral needed

As mentioned above, your existing inventory or the inventory you’re buying through the financing will serve as the collateral for the inventory loan. That means you won’t have to pledge other business or personal assets to secure the loan.

3.   It can be a revolving line of credit

Inventory financing can be structured as a revolving line of credit. What does this mean? As you draw money from the credit line, the amount of credit available to you goes down, and as you repay the loan back, the amount available to you goes back up, and you can use it again if the need arises.

4.   Use the money to order more inventory

Businesses that frequently need to buy new inventories can use inventory loans for additional capital. With the loan proceeds, they can top up or order expensive inventory, so they never run out of products to sell to their customers.

Apply for Inventory Business Loans Today!

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Inventory business loans are beneficial for businesses that need to finance their inventory purchases. However, even if your business belongs to the retail or wholesale industry, it doesn’t mean that inventory business loans are suitable for you. Before choosing a loan, it’s essential to evaluate your business and know the options available to you by consulting a reliable financial expert.

Qualify for a Construction Business Loan with These 5 Simple Tips

What keeps your construction business going? Many contractors would say clients and projects, while others claim it’s marketing and advertising. But acquiring more clients and projects and implementing marketing and advertising won’t be possible without working capital. Working capital is the lifeblood that pumps your entire operations – from generating clients to closing a deal. Construction business loans can inject working capital where you need it the most. Click here to know more about the most popular construction Business loan programs for your company.

Applying for Construction Business Loans

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The speed and convenience of your construction business loan application depend on two factors: (1) the type of loan and (2) the type of lender you’re working with. Many contractors seek help from loan advisors to determine which type of loan program is best for them. Keep in mind that the required documents vary depending on the said two factors. However, expect to be asked for the following documents:

  • Financial Statements
  • Business Plans
  • Personal and/or Business Documents
  • Estimate/Costs of Your Construction Project

Traditional lenders often take a few weeks to assess your loan application, especially because lenders consider commercial construction risky. While requirements vary from lender to lender, it’s best to prepare all the documents related to your construction projects like designs, engineering specs, designs, and more.

For a more lenient and convenient application process, you might want to alternative lenders. Alternative lenders can fund your business within 24 hours and the entire online application takes no more than five minutes. The only downside is that loans from alternative lenders cost more than bank loans, but the convenience and speed of funding make up for it.

5 Tips to Qualify for Construction Business Loans

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Applying for construction business loans shouldn’t be a headache. To increase your chances for approval, here are five tips you should know about.

1.   Plan It Out

Taking out a loan for your construction project is a huge decision. For this reason, it’s important to thoroughly plan for it. There are multiple factors you need to consider before getting started, such as unforeseen costs, estimated costs of the entire project, and other types of expenses you need to fund. Be sure to take these factors into consideration before applying for a loan. Lenders would want to know how you plan to use the funds. For more details about loan requirements, don’t hesitate to contact SMB Compass.

2. Transparency is Important

It’s important to be transparent with your lender. Make sure all your documents are accurate, up-to-date, and readily available for perusal. Before submitting, review your application and your documents to ensure that you’re putting your best foot forward. Furthermore, lenders prefer businesses that have their finances audited by accountants or a third-party company. If you’re going to use the loan to purchase equipment, make sure to indicate the type of machines you want to buy and explain how each machine can benefit your business.

3. Check Your Credit History

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Generally, lenders want to fund a growing business instead of helping business owners pay existing debt. For this reason, most lenders evaluate your personal and business credit when applying for a loan to ensure you have a good credit rating. If you don’t know your current credit score, make sure to get a free credit report from Experian or Equifax.

4. Ensure You Can Meet Minimum Qualifications

Applying for a loan you can’t qualify for in the first place is a total waste of time. Lenders have minimum qualifications for approving a business loan. However, most lenders only approve companies that surpass their minimum requirements. To avoid wasting time and money, only apply for loans you’re sure you can qualify for, and see if you exceed the requirement. If not, work on improving your credit profile or cash flow before applying.

5. Don’t Ask for More than What You Need

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If you ask for more than what you need, you can expect to spend more money on interest payments. Contractors need to limit their expenses in between projects to maximize profits, so the last thing you want to do is to spend money on unnecessary costs. Additionally, asking for more can lower your chances of securing a construction business loan. As mentioned, most lenders want to know what you want to do with the money. If they think you’re asking too much, lenders might lose faith in your capacity to manage your construction projects. Check out these tips from on how to effectively manage cash flow for construction projects.