#ask-the-community
Thread
Hi everyone!
I'm looking for experiences and advice when it comes to inventory financing. Does anyone have recommendations for inventory financing solutions with a term of 3-4 months, ideally at a reasonable interest rate and without requiring too much time for due diligence?
I've sometimes wondered whether it's possible to use ‘factoring’ for purchase stock invoices instead of sales invoices, essentially, having someone buy our inventory and us buying it back on a monthly basis, with a fee based on the COGS or even achieved ROI. As far as I know, that kind of setup doesn't exist yet. It could be pretty nice because a ‘buyer’ could see the volume and margins in the Sellerboard app of the past year(s). So risk is low. (From my point of view 😉) Thanks!
Reaching out to a few contacts in the space and will let you know their thoughts 🤝
@Patrick Crowley thanks!
You could also investigate getting a cash facility at players like Floryn. Quite an interest rate 8-11%, but only for the period when you withdraw the money. And they use inventory as collateral.
Thanks @Micha Medendorp 🙏 I also found this one today: , does anyone have experience with them? Sounds interesting.
Ocean is real factoring, we had the intro call with them, didnt sign up though. It can work in tandem with normal bank financing
@Kasper - LABFRESH thanks! And what made you choose for another option? Too expensive?
I have a huge new customer with 25 stores, so we need to speed things up here 😉
We didn’t use any short-term debt options for many years, we don’t even have an overdraft facility with our bank. We are lucky to have been able to finance all inventory via long-term loans from our customers (€2m in total, 3 rounds over 4 years, payback time 4 years)
But we think it could be nice to do it from August, which is why we are talking to Ocean.
@Kasper - LABFRESH thanks!! We do have an overdraft at the bank, but that's also expensive. We also work with pre-orders and customers are really willing to pay upfront. This could maybe be also interesting for you. Especially when you have more female customers. If they want it, they want it 😅 can be also quite challenging for our customer service (extra questions) and if you deliver later than expected they will be extra disappointed.
If your products are made in the east the best way is to get your supplier to extend payment terms. In China they have something called sinosure which underwrites the risk for the supplier, so if you don’t pay they can get their money back. With this insurance they can get financing. We have 100 days after shipping now, and we pay 4% of the invoice value for those terms.
2nd best is a credit facility from your bank but normally requires some diligence. Last resort is the invoice finance providers like Shopify capital, wayflyer, etc
very true Fred, we got 60 days in China now (versus 90 days in Portugal). Its less than a year ago we moved real production volumes there, so hopefully we can get to 100 days like you!
@Fred - Out'n'About thanks for the share! We have 1 solid partner in China and indeed negotiated better terms for the coming seasons. But 100 days after shipping sounds even better 😉