ENHANCE CASHFLOW BY RELEASING CAPITAL TIED UP IN INVENTORY

Businesses with high volumes of stock can use stock finance, alongside an invoice discounting facility, to release some of the cash tied up in the inventory.

This has the benefit of further boosting working capital, enabling business growth.  The facility is secured against the stock, and can take the form of a revolving, flexible funding facility.

Stock Finance (also known as Asset based lending) is used in conjunction with an invoice discounting or factoring facility as there are no stand alone facilities currently available in the market place.

The best funders provide a revolving facility against raw materials and finished stock usually at 30% and 50% respectively. This is advanced over and above the agreed prepayments for your factoring and invoice discounting facility typically at 80-90%. Therefore total funds advanced can be in excess of the total debtor book secured by way of a debenture covering debtors, raw materials and finished stock.

Many invoice discounting companies say they will advance against stock but they will only do so on a temporary basis – usually 12 months and to a maximum of 100% of the debtor book. This usually happens when a customer is switching factoring companies or taking up invoice discounting for the first time and needs some additional working capital, maybe for a management buy in or buy out.

The invoice discounting companies advance against the debtor book, raw materials and unencumbered equipment in the business. Stock Finance is usually used by corporate finance accounts in structuring mergers and acquisitions. However these facilities can be used by any business wishing to reduce their exposure to the bank.

Whilst stock must be added to the invoice discounting or factoring facility, equipment refinancing need not. This can be done on a stand alone basis and specialist equipment refinance companies can offer an alternative solution to Stock Finance.

For further information and advice contact us now.