Asset-Based Lending
Accounts Receivable Financing
Inventory Financing
What is Inventory Financing?
Asset-based lending is a type of financing secured by an asset, and inventory is a business asset. Businesses can use their inventory as collateral to secure a loan or line of credit. This allows companies to access capital tied up in stock, which can be used for operations, expansion, or other business needs. Inventory financing helps businesses improve cash flow without having to sell off their inventory.
How Does Inventory Financing Work?
With inventory financing, businesses pledge their inventory (finished goods, raw materials, or unsold products) as collateral to secure a loan. Inventory that is obsolete, slow-moving, or difficult to liquidate may not be eligible. Lenders will assess the liquidity and marketability of the inventory before offering financing. The lender will assess the value of the inventory and typically lend a percentage of its value, typically 20%-50% depending on industry type and market conditions. The loan can be repaid over time, and the business may use the funds for day-to-day operations or to purchase more inventory.
What Are The Benefits of Inventory Financing for My Business?
Inventory financing offers several benefits:
- Improved Cash Flow: to cover operational expenses.
- Flexible Funding Options: for growth or new inventory purchases.
- Faster Approval Process and Access to Capital: compared to traditional loans.
- Ability to Leverage Existing Assets: for immediate financing.
- No Need to Give Up Equity: to get the needed working capital.
Can I Use Inventory Financing for Seasonal or Fluctuating Inventory?
Yes, inventory financing can be an excellent solution for businesses with seasonal or fluctuating inventory. Lenders understand that inventory needs can change throughout the year, so they often offer flexible terms. The amount of financing available may change based on your current inventory levels, allowing you to adjust financing as your inventory fluctuates.
Equipment Financing
Capital Expenditures (CapEx)
What is Capital Expenditure (CapEx) Financing?
CapEx financing is a type of loan or financing arrangement designed specifically for businesses looking to purchase long-term assets such as machinery, equipment, or vehicles. This financing helps businesses fund capital-intensive investments without depleting cash reserves or sacrificing operational flexibility.
How Does Capital Expenditure (CapEx) Financing Work?
At Celtic Capital, we provide CapEx loans for the purchase of new equipment, though not as a stand-alone facility. We make CapEx loans when they’re tied to an accounts receivable (A/R) line and here’s why:
On a CapEx loan, we lend on 70% of the purchase price but like a car, the value of that equipment depreciates right away. As our clients are non-bankable businesses at a riskier point in their business’ history, we like our CAPEX loans to be part of a larger facility.
What Are The Benefits of Capital Expenditure (CapEx) Financing?
Key benefits include:
- Ability to Acquire High-Cost Assets: without using cash reserves.
- Flexible Repayment Terms: based on the asset’s lifecycle.
- Streamlined Approval Process: as the loan is secured by your business assets.
- Preserves Working Capital: for operational expenses.
Is Capital Expenditure (CapEx) Financing Suitable for Small Businesses?
Yes, capital expenditure financing is particularly beneficial for small businesses looking to invest in essential equipment. It enables small business owners to make large purchases without taking on the financial strain of a full upfront payment. However, businesses should ensure they can comfortably meet the repayment terms based on projected returns from the new assets.