Loan / Advance Against Inventory

Sellers or Buyers use their inventory as security to obtain cash advance from a Funder. This allows the Sellers or Buyers to optimise their working capital by obtaining funding against their inventory.  A loan or advance against inventory helps to bridge the gap between the point of purchase and the point of sale of various goods.

A loan or advance against inventory is normally structured under a financing agreement and a security agreement between the Funder and the borrower. The financing agreement may define a ‘true-sale’, without recourse financing structure, meaning the rights and title to the inventory are transferred to the Funder; otherwise the agreement may define a recourse based model where the borrower no longer has rights to the inventory but it still liable for the sale of the inventory.

Funders may choose to establish a borrowing base to regulate the amount of cash advanced in respect to market value of the inventory and other criteria which may make some inventory ineligible (e.g., aging, grading, etc.).

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