This article will concentrate on discussion of inventory financing through small business loans programs available in Ontario. Also we will touch on some other techniques how to make inventory funding more efficient.
Most entrepreneurs are keeping inventory at the size that is required by their business. Once business grows and develops, inventory requirements grow as well. Financing is always needed for multiple uses in the business operations, therefore financing inventory sometimes becomes a difficult task. There are many different ways how inventory financing could be arranged through small business loan financing. We will discuss some of the techniques.
When writing a business plan, and implementing a business plan, inventory growth should always be overstated rather than understated. Inventory is what driving and fueling your business, and lack of it creates lack of growth. Wecanfinancial.ca provided dozens of loans this year specifically to fund inventory expansion. Normally when structuring this type of financing we are trying through cash flow loan available through several non-street lenders, or operating line through major financial institutions. Government guaranteed loans do not fund inventory purchase at all, making this transaction highly unlikely to go through any conventional banks business owner use in Toronto.
Cash flow loans are normally based on revenue and historic income. Business plan for any developing business should include a liability line in financial projections of up to 30% of projected revenue of the business. That 30% I typically the upper limit of how high small business loan funding inventory can go. Typical pricing on the loans like this is 6%-8% annual rate, with a term loans of up to 5 years. Most lenders can extend the upper limit of the loan when company can present strong performance over 12-24 months period since receiving the funding. Operating capital funds are the toughest to get in the industry, therefore properly structuring and planning on every stage of business development is a must for all smart business owners and entrepreneurs.
Wecanfinancial.ca and our associates very often help business owners with development planning, and proper budgeting when it comes to inventory. Sometimes entrepreneurs come to us with inventory financing request that is way higher than they really need. We normally go through purchase order and turnover of most important products in order to come up with effective use of funds, so our client will not have over bought inventory. Sometimes it is important to negotiate a better delivery and payment terms with major suppliers, so inventory usage and financing will be as efficient as it is possible in the economic reality that we live in.
Wecanfinancial.ca and our associates stress as hard as we can, that properly prepared business plan, and management policies could result in massive upside, money saving and profit capabilities. We normally insist of preparing a business plan for every client in order to show them what difference it can make. With small business loans placed in IT segment, Retail, Logistics, Professional space, supply chain segments and many others, we are one of the best on the market. Now when it comes to inventory financing, we had many cases where renegotiated payment terms and delivery terms completely removed the need of new funds injections into inventory. We also suggested entrepreneurs to sell off existing inventory under discount, if we see a higher yield and profit capabilities of new purchases being sold to clients. But in many other cases small business loan, cash flow loan or operating line could make a huge difference. Based on previous examples, it takes a professional to go through multiple components of the deal and find out what is the most efficient and money making technique that should be implemented, WeCanFinancial.ca will be able to help everyone in the most appropriate manner.
We will continue our discussions on small business loans, cash flow loans and small and medium enterprise corporate finance in further articles.
Happy financing every one!