101: Inventory finance

Indie businesses can use their inventory to raise growth capital

Playbook

Indie businesses can use their inventory to raise growth capital

Indie businesses do not require venture capital funding to grow, as inventory can get the growth capital.

Jason from Indie.VC wrote, “When you already have inventory that’s selling well, there’s value it can help you unlock. Lenders can and will provide you with capital based on a % of the inventory cost.”

Businesses get the money for the cost of the product inventory, and not the sales price. Businesses can choose to take the money, pay interest and return the money. Inventory financing is like a credit card facility for the businesses. Businesses, young and old, are eligible as long as their inventory has a resale value. Experts suggest that upstarts should use profit as their financing.

Indian businesses will have to pay interest at the rate of 11% to 30% depending upon the nature of the business. Loan amount is between 90% to 100% of the inventory value. Businesses should have a CIBIL rating of 700. Some Indian financing companies are Lendingkart, Bankbazaar, Paisabazaar, ATK Associates, Rattan India, Tata Capital and Capital Float.

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