Why do I need it? If you are looking for a line of credit and are sitting on significant equipment or inventory, you can leverage those assets by securing an inventory line. Proceeds can be used for acquisition, unexpected expenses or for general working capital needs.
How does it work? We will evaluate the liquidation value of the equipment/inventory and assign a value. You can elect to draw down on the line at will, and only pay interest costs monthly, like a home equity line of credit. We will advance either the lower of cost or the Net Orderly Liquidation Value.
How much does it cost? As with all asset-based lending, the cost varies for each transaction. The monthly percentage is based on:
- How liquid the inventory is (liquidation value)
- Where its located (centrally vs spread out)
- Whether or not its perishable, or fad related
Inventory financing is a good way to leverage existing goods for additional purchases. Unlike AR or PO, this functions more like a traditional line, with interest only payments until maturity for only the portion of principal you draw down.
How long does it take? From the time you submit the application and due diligence materials, it takes approximately a week to underwrite, after which an appraiser is sent to value inventory. To close the process takes approximately 3-4 weeks.
Submission/Approval Process? Initial submission for qualification consists of:
- Completed and signed IHC application
- Current financials including AR aging and AP
- Complete inventory list with locations
Once this is all received and evaluated, IHC will issue the client a term sheet and closing list.