Inventory financing covers goods while they wait for a buyer. This page works an invented dealer restock, a purchase order example for a supply wholesaler, a parts draw with set paydowns, two offers priced on one order and a food maker's packaging run. Cobblegrove Business Funding hands each stock request to funding partners, and the yes or no is theirs.
At a glance
- Pays for
Goods bought for resale, parts and packaging
- Paid down
As the financed stock sells, or on set dates in the agreement
- Building material and garden equipment dealers, Jerome County, ID
10 employer establishments with 49 paid employees (CBP 2023)
What is inventory financing? A Jerome, ID outdoor power equipment dealer's restock
Inventory financing is money for goods a business plans to sell. The stock can serve as the security, and the balance falls as units sell rather than on a schedule that ignores sales. It suits a business whose cash is tied up in what sits on the floor or in the back room.
In an invented case, a Jerome, ID dealer selling mowers, trimmers and chainsaws restocks for an invented $22,610. At an invented annual rate of 13.74%, interest on the full invented amount for 90 days comes to about $766.01. Each unit sold earlier pays down part of the balance, which trims that invented figure.
Mower and trimmer sellers fall under building material and garden equipment and supplies dealers, a group with 10 employer establishments and 49 paid employees in Jerome County, ID in 2023 (CBP). Small staffs are the norm in that group: 70.0% of those dealers had fewer than five employees. A hardware store carrying a second paint brand on inventory financing is the case in this blog post.
Purchase order financing example: a Jerome County, ID supply wholesaler with a large order
With purchase order financing, the supplier's bill for goods already sold on a customer's order is covered by a funding source, which lets a wholesaler take on an order its own cash could not carry. The funding source may pay the supplier directly and is paid when the customer settles the invoice.
In an invented case, a Jerome County, ID supply wholesaler receives an invented order worth $46,730 from a contractor customer, and the goods cost an invented $31,870 from its supplier. With an invented fee of 2.65% for each 30 days and the customer paying 52 days after delivery, two invented fee periods cost $1,689.12. That leaves an invented gross margin of $13,170.88 on the order before freight, labor and other costs.
A funding source may ask for:
- The customer's written purchase order
- The supplier's quote or pro forma invoice
- The customer's payment terms and payment history
- Records of similar orders the wholesaler has delivered
How inventory financing works on a parts draw: belts, chain and sprockets at a Jerome County, ID wholesaler
An inventory line may let a business draw against stock as it buys, then require part of each draw back on set dates whether or not the stock has sold. Those set paydowns are called curtailments. They protect the funding source against stock that sits, and they shape the cash the business needs month to month.
| Period | Balance | Invented interest | Due at the end |
|---|---|---|---|
| Days 1 to 60 | $38,290.00 | $812.59 | $3,829.00 curtailment |
| Days 61 to 90 | $34,461.00 | $365.66 | $3,829.00 curtailment |
| Days 91 to 120 | $30,632.00 | $325.03 | The rest of the balance |
In this invented case, interest over the 120 days comes to $1,503.28, and the wholesaler pays $3,829.00 twice before the last date even if the belts and sprockets are still on the shelf. Stock that sells sooner can pay down the balance ahead of those dates.
Comparing inventory financing offers: two quotes on one Jerome County, ID stock order
Offers for inventory money come in different shapes, so set them against one stock order before choosing. One source may quote an annual rate on the balance; another may quote a flat fee for each 30 days on the full amount, charged even for part of a period.
| Offer | How it is priced | Invented cost over 75 days |
|---|---|---|
| Offer A | Annual rate of 11.93% on the balance, charged by the day | $702.07 |
| Offer B | Flat fee of 2.15% of the full amount for each 30 days or part of 30 days | $1,847.28 |
In this invented comparison, Offer B costs $1,145.21 more over the same 75 days, because 75 days counts as three fee periods and the fee does not shrink as stock sells. Questions that bring the two shapes onto one page:
- Is the charge figured on the full amount or on the balance still owed?
- Is there a minimum period or a minimum fee?
- Who carries the stock left on the shelf once the term is over?
- Are there fees for audits or stock counts?
Inventory financing example: a Jerome County, ID food maker's printed pouches and film
Packaging is stock too. A food maker that sells in printed pouches may have to buy several months of packaging at once to meet a printer's minimum run, and that money is gone long before the product ships.
In an invented case, a small Jerome County, ID food maker orders printed pouches and roll film for an invented $17,350 ahead of a large grocery order. At an invented annual rate of 14.26% for 120 days, the invented interest on the full amount is $813.41. If that invented run covers four months of use, the invented carrying cost is about $203.35 for each month of packaging on hand.
A funding partner may ask for the grocery order or recent sales records that show the pouches will be used before the artwork changes. Ingredients a food plant buys before its distributor pays, and whether they count as stock, are weighed in the plant equipment post.
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