Inventory loan or line of credit

When it comes to financing a business, there are all types of loans available, depending on your financial state at the moment, the type of business you are running, and your own individual needs.

One type of loan you might consider for your business is an inventory loan or line of credit. This type of loan is a bank line of credit that is secured by using the inventory in your business as collateral. This is an ideal type of loan for businesses that tend to have a good deal of inventory at any given time, and frees up some of the cash that is used to keep that inventory.

This type of loan is best used for businesses who sell actual products and have an inventory in stock. So, if your business is more service-oriented (for example, if you have a personal training business or a tutoring business), you might want to get a different type of loan, as you have no inventory that could be used for collateral.

Qualifying for an inventory loan or line of credit
If you are considering applying for an inventory loan or line of credit it's a good idea to take the following criteria into consideration before applying to improve your chances:

• You already have a good sales history. If you have a good sales history, then chances are that you're making money. Banks want to see this because even though they are using your inventory as collateral, they don't want collateral-they want your money.
• You have excellent credit. It's difficult to obtain any type of loan, business or otherwise, without outstanding credit. The better your credit, the higher the chances you will repay your loan.

How to apply for an inventory line of credit
If you think your business is a good candidate for an inventory loan, you'll first have to do some research to find a company that offers that type of loan. From there, they will typically require the following:

• Keep inventory records organized. Because your line of credit is dependent on your inventory, it is important that you keep it. Keep records of how old the inventory is, how much it cost, and so forth.
• Keep inventory in good shape. Lenders may want to inspect your inventory, so keep it well-organized and well taken care of.
• Keep sales records. Make sure you can prove to lenders that your inventory moves quickly and that you are not saddled with outdated inventory that can't be sold. You should also have current orders for merchandise.
• Have a business plan. If you are applying for an inventory loan, your business is most likely already up and running. However, you should still have a business plan to present to the lender. It should be up to date and show that your business is growing according to plan and that you can keep your loan payments current.
• Collateral. If your business is new or your inventory is not as strong as they would like, they might request a second form of collateral, so be prepared to offer collateral, whether from the business or your own personal assets.

An inventory loan or line of credit is a good option for companies that have moving inventory that keeps much of their cash tied up.The above tips will help increase your chances of obtaining an inventory loan or line of credit.