The Future of Inventory Finance: Trends and Innovations
Inventory finance has remained a mainstay financing solution for companies in a wide range of industries for decades.
But in recent years, economic and market forces have prompted changes and innovations. Here, we’ll look at some of the key trends and innovations shaping the future of inventory finance.
Inventory financing is a form of asset-based lending in which the amount borrowed is determined by the value of inventory. The financing usually comes in the form of a short-term loan or a line of credit; lenders will lend a percent of the inventory’s value. There’s usually no need for collateral since the inventory secures the loan. While it sounds basic and straightforward, innovations in inventory finance offer important developments and advantages for a growing business.
Customization
Individualized, flexible business finance solutions are the name of the game. Companies, especially small, mid-sized and fast-growing ones, need financing programs that work for their specific business models.
Two major focus areas are impacting the demand for customization: supply-chain issues and an increasingly fluctuating economy. The supply chain problems that so many businesses experienced during the pandemic – which are still fresh in people’s minds – underline the importance of developing key supplier partnerships and purchasing flexibility. Customized financing programs help each business manage their unique inventory needs.
Fluctuating interest rates, inflation, bond prices, international economies and more have impressed on businesses the need to move beyond traditional financing, and find solutions that allow them greater flexibility in repayment schedules and terms. Individualized inventory financing programs based on detailed understanding of a company’s industry, market and business model can provide this flexibility.
Cross-border integration
More and more North American businesses are operating across borders. While inventory financing can be an effective program for a company in the United States or Canada, effective implementation for business between the countries involves far more than a satellite sales office in a province or state. The ability to seamlessly incorporate inventory financing in both countries – with deep knowledge of local culture and legal systems – is a key current, and future, component of inventory financing.
Advanced technology
The use of digital platforms for applications, management and repayment is becoming more widespread. These platforms provide real-time analytics and insights, helping both financing providers and customers make faster, better decisions.
Finance providers are partnering more often with select service providers to integrate customized third-party apps and to manage customer portfolios. Along with careful integration of artificial intelligence, these advances are speeding the underwriting process and helping providers identify key customer business changes faster and more effectively. Additional capabilities with e-docs and self-service contract adjustments are making day-to-day business easier and faster. An experienced, customer-centric inventory finance partner can now even provide same-day funding in many situations.
Sustainability financing
As in all areas of finance, sustainability is gaining traction in inventory financing. Sustainability is now among the top three initiatives for most large corporations. Nearly all European and North American Fortune 100 companies have committed to net-zero obligations during the next few decades, representing massive need for funding.
Smart use of inventory financing can help companies achieve their sustainability goals by streamlining supply chains, ensuring optimal stock levels, navigating seasonal fluctuations and adapting efficiently to shifting consumer demands.
The future of financing
Inventory financing programs designed to increase purchasing power and liquidity help customers make the purchases they need, when they need them. Current trends in inventory finance are making a long-standing program option one that can help companies maneuver and succeed in today’s fast-changing marketplace.