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What is Stock Finance?

Stock finance, also known as inventory or stocking finance, is a flexible funding option that allows businesses to release working capital tied up in unsold stock. This type of loan is typically used for:

  • Releasing working capital to invest back into your business, i.e., buying seasonal stock, purchasing additional parts to complete products, etc.
  • Responding to unexpected changes in the market your business can take advantage of, i.e., soaring demand for a product
  • Counterbalancing natural fluctuations in high/low demand for products and the knock-on effect this has on your business’ available working capital

Enness will talk you through your options and help you understand what inventory finance will look like for your business. Your broker will be able to talk you through what kind of finance you will be able to secure, how you can use it, how much it will cost, terms, exit and so on.

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Stock Finance FAQ's

Repayment, Interest Rates and Costs

Lenders will work on the assumption that you will be repaying the loan by selling your stock. Therefore, lenders will want to understand how you plan to sell your stock and look at past sales. If you sell large quantities of your stock in a few, high-value orders, your lender will most likely propose terms under which you repay the loan when you sell your stock. If you make steady sales or are experiencing high demand for your inventory and want stocking finance to keep up with demand, you may reimburse the loan in monthly repayments. 

Interest rates and the overall costs of stocking finance vary significantly from lender to lender. Lenders will consider you on a case-by-case basis. What they will offer in terms of interest rates, terms and the overall cost of the loan is based on several factors. How much you want to borrow, the type of stock you have, your company’s overall financial position, the length of the loan and risk will all play a part in what Enness can negotiate for you. Your deal may also depend on why you are seeking a loan in the first place. If you are seeking stock financing to buy more inventory and keep up with a boom in sales, you may get a more competitive deal than if you are riding out a seasonal lull, for example.

Nuances of Inventory Finance

Lenders will start by wanting to understand your company’s financial situation and the reason behind your requirement for stocking finance.

One of the foundations of success will be to approach stock lenders who will take a holistic approach to analysing your company’s financial situation, rather than a "black and white" review of your financials, which is often the norm. The latter lenders will be quick to write off your request if you don’t meet rigorous criteria. In contrast, there are lenders that take a more rounded approach and will consider justifiable explanations for fluctuations in your P&L that could otherwise be off-putting to a lender. If you have a situation that your lender could potentially view negatively (i.e., what could be perceived to be revenue gaps, etc.), it’s vital to approach a lender who will consider and make decisions based on your wider explanations, rather than just the facts and figures.

Stock lenders – regardless of their approach – will want to see your company’s financials and understand how your business is operating. That said, getting the best stocking loans available is rarely as simple as just laying all the facts on the table. How you present your situation is critical, as is being able to identify and explain the details that might be off-putting to a lender without further explanation. Inventory finance is an art, and understanding who to approach, how to present your case, what each prospective lender wants to see and what will provide them with comfort is the key to unlocking the best deals.

Enness are expert negotiators of stock finance, and the team has a track record in negotiating some of the largest corporate finance deals. Some of the best lenders that offer the most advantageous stocking loans don’t publicise their services and require specialist introductions through a party like Enness. In other cases, you will find that a broker like Enness will open doors that would otherwise have been shut.

Operating alone, it is easy to be backed into "take it or leave it" packages, and lenders will often leave no room for negotiation. Enness will open up a dialogue and arrange the best deal and the most advantageous terms.

If Enness sources more than one offer, understanding the deal you’ve been presented with is also essential. It sounds straightforward, but lenders will offer stocking loans on a case-by-case basis. You will often be presented with different rates, terms and costs to consider, and understanding what your best option is won’t always be easy. Enness will talk you through each option and help you identify what the best deal is. Stock financing is rarely a race to the bottom: sometimes, a more "expensive" offer that gives you more flexibility may well be a better deal for your business.

Stocking loans are popular with entrepreneurs and private and family-run businesses. Listed companies have other lending and debt options available to them, which is generally why they don’t enter this kind of financing deal.

Why Enness for Stock Finance?

Enness has access to specialist lenders in the stock financing space. Who Enness approaches for you will depend on your inventory and how much you want to borrow. It can prove frustrating to present your needs repeatedly to a range of lenders, only to find they don’t lend against the stock you hold. Enness will go straight to the lenders that can offer you the best deals. Laying out the details, Enness can negotiate stock finance quickly, saving you time and money in lengthy searches and explanations with multiple lenders.

Stocking finance can be used to unlock minimal capital – just a few thousand pounds – and most lenders in the space are set up exclusively for this kind of lending. Not all lenders offer high-value stock loans, and those that do, don’t necessarily publicise their services, instead preferring introductions through a trusted network. Enness has access to all the best stock lenders, meaning you can go straight to the best sources of finance. With deep connections in the stock finance lending community and a track record to match, Enness’ reputation will open doors for you, and you’ll be able to and get offers from lenders you won’t have access to directly.

How Does Stocking Finance Work?

While negotiating a great deal can be a challenge, stock financing isn’t that difficult to grasp as a concept. In essence, your lender buys your stock from you in return for offering you a loan that corresponds to a portion of the value of your inventory. Your lender allows you to retain your stock and effectively sell it on their behalf. You will pay interest in return for being able to borrow money in this way. Because of the associated risks for lenders with this type of loan, i.e., depreciation, taking over and selling stock if your company defaults on repayment etc., you will only be able to borrow a portion of the value of your stock.

Enness will start by understanding your needs and requirements for stocking finance. Then, the team will approach specialist lenders on your behalf and will negotiate the most competitive rates and terms for you.  In the first instance, lenders will want to:

  • Ensure your business is on solid footing
  • Understand future demand for your stock
  • Grasp why you are seeking stocking finance
  • Understand what you will do with the capital you raise from stock financing
  • Ensure that the stock you have was ordered justifiably (i.e., wasn’t ambitious in quantity)
  • Understand more about your stock (i.e., if it is a completed product, partially completed, etc.)

As well as negotiating stock finance for you, Enness will be on hand to help ensure the transaction runs smoothly. You will benefit from working with an astute, experienced player that is operating wholly in your best interests and whose only incentive is to get the best deal for you. As a result, Enness will help you to see the deal completed quickly, troubleshoot, and provide guidance at any point in the transaction.


Contact Enness for Stock Financing

Enness will save you valuable time and make the process of sourcing and negotiating stock financing smooth and efficient. No matter how much you want to borrow or what stock you hold, Enness will secure the stocking finance for your business.

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