• Stock Finance Loan Funding For Unsold Unfinished Goods

    Inventory or Stock finance can be a difficult type of facility to find. There are some large ABL (Asset Based Lending) lenders that offer it, but typically it is for very substantial amounts and often only as part of an overall package of funding against a variety of assets.

    This is not the case with all providers. We have found an option for standalone stock finance from a UK-based finance house that is taking a very innovative view.

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    What Is Stock Finance?

    Stock finance loans against unfinished goods and unsold inventory.

    Stock finance is a financial term used in two different ways:

    • Definition: Stock finance is a financial solution that enables businesses to unlock capital tied up in their stock held, including raw materials, unfinished goods, and unsold products.
    • The terms can also be used to describe a range of facilities that are not linked to stock but are used to purchase additional stock or raw materials

    Which Businesses Can Benefit From Stock Finance?

    This financial solution is beneficial for businesses with significant stock levels. Businesses that tend to hold stock or an inventory of raw materials include:

    Benefits of Stock Finance

    Some of the benefits of stock finance include:

    • Improved Cash Flow: The facility unlocks funds tied up in stock to cover operational costs, supplier payments, or unexpected expenses.
    • Increased Purchasing Power: The extra capital can be used to negotiate bulk discounts or favourable terms with suppliers.
    • Flexible Financing: Funding to suit business needs, whether it's for seasonal stockpiling or managing fluctuating demand.
    • Supports Growth: Enables businesses to scale operations by maintaining optimal stock levels without cash flow interruptions.
    • Non-Dilutive Funding: Unlike equity financing, stock finance does not require giving up ownership of the business.
    • Top-Up Financing: In many cases, this type of finance can be offered in addition to invoice financing (even with another existing provider) or other types of funding. If you already have invoice finance in place you may be able to get further funding on top of what you already have without needing to move invoice finance companies.

    Stock Finance Against Unfinished Goods That Are Unsold

    Now there is an option for normal SMEs that are seeking stock finance. One of our panel of funders provides a stock finance facility that can stand alone, or be used in addition to most existing invoice finance facilities. This can substantially increase your purchasing power and the amount of credit that you have available to your business.

    There are no early repayment charges and you will not have to change the way that you handle your stock.

    How The Facility Works

    This facility can be used to finance either imports from abroad or supplies from UK suppliers. This can be useful in situations where companies have sought to resupply from UK-based providers, in order to overcome global supply chain problems.

    The facility can operate as a revolving loan that is drawn down and repaid multiple times.

    Unfinished Goods That Are NOT Presold

    Furthermore, the facility can be used to finance:

    • Stock purchased to increase inventory, i.e., that has NOT been presold.
    • Components parts or raw materials that are NOT finished goods.
    • Payments to UK-based suppliers or suppliers overseas.
    • Payments to suppliers in currency or GBP (Sterling).

    In many cases, other funders will require goods to be finished and presold, i.e., the buyer has existing orders for the goods. that are already in a finished state This is NOT the case for this particular funder. This is what makes them stand out from other inventory finance companies.

    Stock Financing Application Process

    The stock financing application process is as follows:

    • Assessment: The finance company evaluates the value of the stock, business financials, and operational needs.
    • Approval: Based on the assessment, the financier determines the funding amount and terms.
    • Funding: Once approved, the agreed funds are disbursed to the business or directly to suppliers.
    • Repayment: Typically, repayment is structured to align with the sale of the financed stock, ensuring manageable cash flow for the borrower.

    Additional Trade Finance To Fund Imports Or Purchases

    For more information about financing finished goods against presold orders please see our guide to trade finance. This can be used for purchases from UK suppliers or those based abroad.

    An Example Of A Transaction That Can Be Funded

    As an example, if products such as food ingredients are being purchased from one supplier, and packing materials such as jars are purchased from another, both could be paid for. The buyer will then enjoy a period of credit before they have to repay the stock financing. Goods can either be bought to fulfil existing orders or for increased inventory.

    Typical Facility Terms & Eligibility Criteria

    The facility can release between £25K and £300K to a UK company. The funds can be paid away to suppliers for purchases that do NOT have to be finished goods.

    The business needs to hold stock or raw materials to qualify for funding, these should be non-perishable items. This asset underpins and provides security for the finance.

    Typically, a personal guarantee from at least one homeowning director will be required, although a third-party guarantee may be accepted in some cases.

    Pricing And Fees

    Fees and pricing will be agreed upon on a case-by-case basis, but typically include interest on the amount outstanding for an initial 30-day period, with additional days charged on a pro-rata basis. There will typically be a fee to set up the facility and a transaction charge each time funds are paid away to a supplier under the stock finance facility.

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Examples of funders we work with:

apollo business finance
pennyfreedom
ifg
berkeley
acg
giant finance