March 19, 2018 at 4:03 pm #176433
Loan (400k) is to buy equipment (150K) and raw materials (250K) which will be converted into inventory over 3 week period. Once inventory is converted to cash (350k), it seems that secured interest is now simply the equipment (if the cash isn’t reinvested – or is used for something else). Ideally, the business would use the cash to purchase additional raw materials and generate more cash (and the cycle continues to be repeated). My concern is — how can I make certain the cash generated from the sale of inventory remains in the business (ie to purchase additional inventory).
Any advice would be appreciated.March 19, 2018 at 9:15 pm #176523
Businesses that sell products need inventory in order to get more sales and make more money. If inventory is part of the collateral you’re using to secure your loan then there will be conditions from your lender. Sometimes you’ll be required to notify them if your cash gets below a certain point and others will require you to keep your inventory levels at a certain amount. Inventory will be discounted greatly when it’s being used as collateral. You can also check out inventory financing and equipment financing as two options to fund each of your two needs. Good luck!
- This reply was modified 1 month ago by Jeff White.