More inventory, more opportunity.
Typically, a revolving line of credit provides the working capital growing companies need during the operating cycle. Funds are often advanced to cover inventory purchases and to carry accounts receivable until paid. Then the loans are repaid as receivables are collected and become cash.
Occasionally, when companies expand rapidly in multiple locations, inventory purchases cannot be repaid within one operating cycle, and must be repaid through cash flow generated as the company’s growth is digested. Depending on the company’s cash flow and the stability of the inventory, such inventory may be financed with a business term loan.
Key Points to Consider
How will the loan to finance inventory be repaid? Within the current operating cycle or over time?
How likely is the inventory to become obsolete? How volatile are the prices of the inventory?
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