Rainside Capital Group passes the request to funding partners, who value the stock and decide.
A loan or line secured by the stock it buys: parts, materials or components bought before the sale. Funding partners decide how much of the stock value they can lend.
At a glance
- Secured by
The stock being bought, in many offers
- Repaid
As the stock sells, or on a fixed schedule
- Auto repair shops, Rice County, MN
45 employer establishments (CBP 2023, NAICS 8111)
What is inventory financing for Rice County, MN finishing contractors?
Inventory financing is funding for goods a business buys and holds before it is paid for them, secured in whole or part by those goods. For a Rice County, MN finishing contractor, the goods are job materials: tile, flooring, cabinets or paint bought in bulk ahead of a large contract, held in a shop or storage unit until the crew installs them.
The stock as collateral is what sets it apart from a working capital loan. A partner can lend against the value of the materials, so the request centers on what is being bought, from which supplier, and when the job that uses it pays.
Purchase order financing vs inventory financing for Faribault, MN finishing contractors
Purchase order financing pays a supplier to fill one specific customer order; the customer's purchase order is the basis for the funding, and the money goes back when the customer pays. Inventory financing funds stock more generally and is secured by the stock itself, whether or not a particular order is attached.
Illustration only, invented figures: a Faribault, MN flooring contractor receives a $40,000 materials order from a general contractor building an apartment project. PO financing would pay the supplier for that order and be settled from the general contractor's payment. Inventory financing would let the contractor buy a larger stock of the same flooring for this job and the next one, secured by the flooring on the shelf.
How inventory financing works for Faribault, MN manufacturers
A manufacturer's inventory covers raw materials, components and finished goods waiting to ship. A partner offering inventory financing values that stock, lends a share of the value, and can ask for regular reports of what is on hand. As goods ship and the customer pays, the balance comes down and new stock can be financed.
Illustration only, invented figures: a plant holds $80,000 of steel and components, and a partner offers to lend 50% of that value, or $40,000. The share any real partner offers depends on how easily the stock could be sold, and finished goods and raw materials can be valued differently.
Rice County, MN counted 79 manufacturing establishments with paid employees in 2023 (County Business Patterns, NAICS 31-33), from small shops to large plants.
Inventory financing companies Faribault, MN manufacturers compare
Inventory financing comes from several kinds of company: banks offering asset-based lines, finance companies that specialize in inventory or equipment, and suppliers that offer their own payment terms. A Faribault, MN manufacturer comparing offers should line up the same items on each one:
- The share of stock value the partner will lend, and how it values the stock
- The rate and every fee, including any fee for inspections or audits
- How often stock reports are due, and in what form
- What happens to the balance if stock sits unsold
- Whether other business assets are pledged as well
Supplier terms can cost nothing extra if paid on time, so compare an offer with what the supplier itself allows.
Inventory financing example: a Rice County, MN finishing contractor stocking up
Illustration only, invented figures: a Rice County, MN tile contractor buys $24,000 of tile and setting materials ahead of a large order and finances the purchase at an annual rate of 12% over 6 months. Six payments of $4,141.16 clear it, for $24,846.96 in all, so the financing adds $846.96.
Whether that is worth it depends on what the bulk buy saves. If buying the whole job's tile at once earns a supplier discount larger than the interest, or protects the job from a price increase, the numbers favor buying ahead; if not, buying as the job needs it costs less.
What a Faribault, MN stock request includes before it reaches a partner
The request form takes contact details and a few ranges; the details of the stock come up on the phone call. For an auto shop, a home builder or a manufacturer in Faribault, MN, the call covers:
- What is being bought, from which supplier, and the quoted price
- The order or contract the stock is for, if there is one
- How long the stock usually sits before it is sold or installed
- Recent business bank statements and annual revenue
- Where the stock will be stored
An auto repair shop buying a bulk order of filters, brakes and fluids is in a different position from a builder buying a contracted house's windows and lumber, and a partner can weigh each one differently. Both trades have a real local base: County Business Patterns lists 45 automotive repair and maintenance establishments and 67 residential building construction establishments with paid employees in Rice County, MN for 2023 (NAICS 8111 and 2361).
By Rainside Capital Group ยท Updated