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Finding additional working capital to hold stock for some businesses can be extremely difficult, but sometimes essential in order to meet contractual customer obligations. This can have a huge impact on cash flow and slow down further growth. Our lenders work closely with our clients in order to support their stock funding requirements and aim to make funds available within a matter of days.

Stock Finance

Easy online application, apply for finance in minutes
Quick approval (generally agreed within 24 hours of application)
Flexible contracts ensuring available finance when you need it

What is Stock Finance?

Stock finance is where the purchase of goods is financed without there being an onward sale of those goods agreed at the time of financing. In other words there are no pre sales and the lender is taking a commercial view that you are able to sell the stock, either whilst in transit to you or when it has arrived.

How does stock finance work?

You raise the purchase order to your supplier, requesting the supplier to raise an invoice in favour of the Stock Finance provider
The supplier sends the invoice to the finance company for direct payment
Up to 100% of landed cost of goods can be financed – generally in line with already agreed payment terms including deposits prior to manufacture. Payment in currencies is standard
Once landed stock is typically moved and stored with your own premises, the finance company may require to be noted on relevant transit and warehousing insurance policies
Once the stock is sold repayment is required either via your cash flow or debtor finance (if appropriate) Each transaction should be repaid between 90 and 120 days

The mechanics of the facility are identical to Trade Finance with the exception that the goods purchased are generally not tracked through to a sale. Repayment can be via the sale of any stock already owned by the company.

What are the benefits to using Stock Finance?

Additional purchasing power with your suppliers
May allow a renegotiation on purchase price of goods if you are able to pay more promptly as a result of having the finance
Enables you to sell goods with the knowledge that you will have the ability to source supply without the fear of running out of cash
It is generally an addition rather than replacement to existing funding in your business
Customer orders are not required at the time of purchasing the goods

What are the criteria needed to gain a facility?

Lenders criteria differ but in the main the following are required;

UK registered limited trading companies with UK resident Directors
Minimum 12 months trading history evidencing purchase of goods from supplier who you wish to finance
Gross margins on the sale of the product >20%
Personal guarantees are typically required to cover up to 100% of the value of the facility
Guarantors to the facility should be homeowners with equity in UK property
Retail businesses can be financed but there are fewer lenders prepared to take the risk

As a general rule, companies seeking stock finance should be in a stable and profitable position. There is more reliance on the overall company position than under the Trade Finance facility that will be repaid through a confirmed order.

What security will my business have to provide?

Typical security over the business consists of a debenture behind the Bank (if appropriate) and Personal Guarantees. The lender will also have rights over the goods they have financed. Depending upon the size of the facility the lender may seek to support personal guarantees via legal charges over a business /personal property.

What’s the difference between Stock and Trade Finance?

The real difference is that Trade Finance has been designed to support businesses that have either pre-sold the items and will make immediate delivery or at least will do within a very short period of time. Stock finance however, will look to support businesses that may either have a requirement to hold a certain level of stock to keep their customer base happy with regards to delivery times or simply need the raw materials in order for them to produce the end product quicker.

How do I know which facility is right for my business?

From the above information, you should be able to establish what the best product is for your business but we would always encourage you to discuss all options with your accountant to ensure you make the most of your working capital.