Financing inventory in transit can be a great way to get the products that your business needs and pay your suppliers on time. This type of financing is becoming more and more popular, as businesses struggle to keep up with the global shipping issues and freight delays caused by the pandemic. When your inventory is in transit for longer than usual, it can severely cripple your cash flow.
In this blog post, we will explain what inventory in transit financing is, how you can qualify for it, and some of the advantages and disadvantages of using it.
Inventory in Transit Financing: The Basics
Inventory in transit financing is a type of financing that allows businesses to purchase the inventory they need, and finance it while it is in transit to the final destination. This can be a great way to get the products that your business needs so you have enough inventory to cover future sales.
Different Ways to Finance Inventory in Transit
There are a few different ways that businesses can finance their inventory in transit. One of the most common is through factoring or an asset based loan. Factoring is when a business sells its accounts receivable to a third party at a discount. This allows the business to get the money that it is owed sooner, and provides cash to finance your inventory in transit.
Another way to finance inventory in transit is through credit cards if your supplier accepts them. This can be a great option for businesses that have good credit and can get a low interest rate. However, it is important to be aware of the fees that come with using credit cards, as they can add up quickly.
Qualifying for Inventory in Transit Financing
In order to qualify for inventory in transit financing, businesses will need to have a history of sales that demonstrate the ability to sell the inventory when it arrives. Additionally, businesses will need to have the goods inspected by a 3rd party and be able to show that the products they are financing are in the right quantity and quality.
Advantages of Inventory in Transit Financing
There are a few advantages of inventory in transit financing. One of the biggest advantages is that it allows businesses to get the inventory that they need on time. This can be a great way to keep up with the ever-changing demands of the market. Additionally, financing inventory in transit can help businesses manage their cash flow better. When working capital is tied up in inventory, it can put a strain on a businesses operations.
Disadvantages of Inventory in Transit Financing
A few disadvantages exist of course. One of the biggest disadvantages is that businesses will be responsible for paying interest on the financing regardless of how long it takes for product to arrive. Additionally, if businesses are not able to sell the inventory that they are financing, they may be stuck with inventory that they cannot use.
Inventory in transit financing can be a great option for businesses that need to purchase inventory before they are paid for it. However, it is important to be aware of the advantages and disadvantages of financing inventory in transit before making a decision.
If you are considering financing inventory in transit for your business, contact us today. We would be happy to help you find the best financing option for your business.