Medical Inventory Financing

The term inventory financing refers to a short-term loan or a revolving line of credit that is acquired by a company so it can purchase products to sell at a later date. These products serve as the collateral for the loan. Inventory financing is useful for companies that must pay their suppliers for stock that will be warehoused before being sold to customers. It is particularly critical as a way to smooth out the financial effects of seasonal fluctuations in cash flows and can help a company achieve higher sales volumes by allowing it to acquire extra inventory for use on demand.

Inventory financing is a form of asset-based financing. Businesses turn to lenders so they can purchase the materials they need to manufacture products they intend to sell at a later date.

This kind of financing is common for small to mid-sized retailers and wholesalers, especially those with a large amount of available stock. That's because they typically lack the financial history and available assets to secure the institutional-sized financing options larger corporations are able to access

Because they are generally private companies, they cannot raise money by issuing bonds or new rounds of stock. Companies may use all or part of their existing stock or the material they purchase as collateral for a loan that is used for general business expenses. As noted above, inventory financing allows businesses to purchase inventory to run their businesses. The reasons why they rely on this kind of financing.