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Stock Finance

What is stock finance?

This is a mechanism which gets working capital off the hook from the stock of finished goods or raw materials, which works by lenders purchasing the stock from the seller on behalf of the buyer. Though stock finance is a lot more different from invoice finance and usually used between 30 to 90 days.

Unlike other finance methods, stock finance is a lot more different direct funding of the working capital related to purchase and sale of goods and services both domestic and international. Stock finance is popular among domestic and international trading companies. It is important to acknowledge the difference between trade finance and other supply chain or invoice finances.

In this stock financing type of funding the borrower uses a lender’s funds to purchase the product to sell it further. This is the usual stock that sits in the warehouse for further transactions. One of the reasons behind stock finance is used over trade finance is there are no confirmed purchase orders, buffer stock would be required to sell the products to the customers when trade finance is not applicable. An example of this practice is selling to individual customers online.

Major products that can be purchased using stock finance:

  • Electronics products
  • Watches
  • Furniture
  • Lighting
  • Commodities
  • Hardware
  • Wood
  • Cars

What Does Stock Finance include?

  • Lending
  • Issuing LCs
  • Factoring
  • Export Credit
  • Insurance

Benefits

  • check_circle_outlineImprove cash flow: Helps to release funds that might be tied up
  • check_circle_outlineFlexible: Helps businesses in seasonal fluctuations or during high levels of stock
  • check_circle_outlineAs per the increase in inventory, funding is also increased that results in improving business cash flow
  • check_circle_outlineYou can use the funding for purchasing more stock, or can even invest within other business areas and to fulfil commercial opportunities.
  • check_circle_outlineConfidentiality: Enables you to get funding confidentially

Features

  • check_circle_outlineAlongside available with Invoice Finance facility
  • check_circle_outlineFunds are released against different stock
  • check_circle_outlineIt considers finished goods, raw material and even the work in progress
  • check_circle_outlineIs also available for stock which is held domestically

How does Stock finance facility work?

Many businesses are not able to work based on normal trade finance, where two parties are involved buyer and the seller. They will need to purchase and store stock. Some of the reasons mentioned below:

  • Protect reputation by not being under-stocked
  • Hedge out risk
  • Having stock to provide for seasonal fluctuations
  • Demand adjustment in certain products
  • Requirements for buyers and suppliers

It is a major part of the trading business. Another reason is to cover risk in international trade and cash flow. There are risks where the importer that the exporter may make the payment but it refuses delivery. Conversely, if the exporter extends a facility to the importer, they may refuse to make the payment or unnecessarily delay. To solve this problem, LC can be used, which is opened in the exporter’s name, is opened by the importer through a bank.

LC is considered the most traditional stock finance mechanism.. Security is the most important in any form of trading since the seller is dealing with an unknown buyer. Stock Finance largely depend on verifiable and secure tracking of physical risks and events in the chain between the two parties. Stock finance mechanism toils to tailor the risks involved in global trading.

Examples of Stock financing

  • 1) Online retailer: An online retailer will sell different types of products directly to the consumer through a website portal.
  • 2) Licensed manufacturer: A manufacturer of the product would sell all around the world and buying from the far east. It can trade or stock finance-based.
  • 3) Commodity Seller: The trader will keep a good stock of the commodity with pre-purchasing orders that were being sold over a period of time. But in any case, they would require trade finance against the stock held in the warehouse.

How connect2India helps to arrange Stock Finance

Stock Finance is an effective solution for many businesses who are seeking for an additional source of funding. Getting an arrangement which is relevant for your business needs and can provide the level of funds you need may require our expert help as:

  • Providers are specialised in certain sectors - and may not have the expertise to offer solutions for your business needs
  • All providers may or may not offer the scale of funding required by your business
  • Interest rates and fees can vary greatly between providers

At Connect2India we can work with you to look and understand your financial needs, to help you in deciding if a Stock Finance solution really does offer the most effective and appropriate solution for your business. Then we can provide you with lenders who will be most suitable for your particular business sector, and who can provide you with the required level of funding at the most competitive rate.

Want more information about stock finance? Talk to our trade finance experts now.

Features of Connect2India finance

Why Connect2India

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Easy processing

Complete online application process makes it easier for us to process forms faster and provide same day loan approvals.

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Fast disbursals

With online loan processing, business loan is disbursed within 3-5 business days of loan approval.

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Collateral free loans

No need to put your valuable assets in risk, we have unsecured loan that do not require any collateral.

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Fair interest rates

Our advanced algorithms determines the best rates for the type of loan you business require.

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No hidden costs

There will be no hidden costs or any other charges involved. Only processing fee of 2% is charged

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Flexible repayments

Loan repayment structure can be customized depending upon how your business is growing.