Close search

Top Inventory Loans in South Africa

GroWise Capital
Best for SME funding
Cash Advance
Merchant Cash Advance
Merchant Stock Advance
Read Review
Compare Quotes
Retail Capital
Best for Unrestricted Funding
Flexible repayment options
Unrestricted funding
Early settlement discount
Re-advance available
Read Review
Visit Site
Lulalend Inventory Loans
Best 100% online application process
No collateral required
100% Online applications
3, 6, 9 and 12-month terms
No paperwork
Read Review
Visit Site
Table of Contents
Introduction

Even when business is going well, a short-term shortfall between the cash coming and going out to pay for business expenses and suppliers can result in cash challenges. An inventory loan helps businesses to buy stock and mainly benefits product-based industries. The term inventory financing refers to a short-term loan or a revolving line of credit that is acquired by a company so it can purchase products to sell at a later date. These products serve as the collateral for the loan.

For the most part, needing inventory financing is a good thing. It means your business is doing well enough that it has to prepare for the increase in demand or have sufficient stock. It can also be useful to maximise your inventory to drive customer traffic through your doors or e-commerce site. Retailers also use inventory loans to prepare for busy periods and to grow their sales or to take advantage of a discount deal on stock that requires more cash flow than they currently have available. Typically, revenue generated from the inventory is used to pay off the loan.

Inventory loans are often unsecured and do not require any collateral, because of this lenders will focus mainly on recent business performance to assess how risky your business is. In some cases, lenders may request that the inventory you purchase be used as security for the loan.

Lenders are more likely to approve inventory financing for product lines that have high potential. As the business owner applying for the loan, you may have to work extra hard to prove that your products will sell.

Main Features

Qualifying criteria

Your business’s previous financials and inventory record will determine whether your business is eligible for an inventory loan.  

Lenders should prepare a detailed report of your sales history, including inventory turnover, profits, and sales projections. Your sales history is important as it proves your business is profitable and can repay the loan. 

Another important factor that lenders will pay attention to is inventory control and product movement. They will require timely reports on the shipping and returns on products, accounts receivable and sale order receipts. 

Loan terms 

As with a regular business loan, an inventory loan is for a set amount that is paid back in monthly payments over a fixed repayment term. It can also be paid in a lump sum following the sale of inventory. The lender is responsible for paying back the full loan amount. 

Repayment term

The term refers to the amount of time it takes to pay back the total amount borrowed from a funding provider.  A ‘fixed term loan’ refers to a loan where the repayment terms are set. However, you can also opt for a flexible,  which allows funds to be paid back in line with the business’ turnover and therefore uses an estimated repayment period.

Collateral

In the case of an inventory loan, your products, or inventory, may serve as collateral in the event that you cannot repay the loan. If the loan is unsecured it will not require any collateral. 

 

Pricing

Inventory financing usually does not require any collateral, as a result it typically comes with higher interest rates.

Consider the following when choosing a lender.

Principal loan amount – you will be required to repay the loan amount taken out in full.

Interest rates – in addition to the principal amount you will be required to pay interests on the loan amount. A loan that is considered low risk by the lender will typically have a lower interest rate. The amount of interest you must pay will depend on the business loan terms, which will be agreed on in advance with the lender.

Additional fees – Closing fees or other transaction costs fees that you need to pay before, during and after the loan process.

Buyer's Guide

While access to financing at a critical time can be life saving for a business, the wrong business loan can be expensive for small business owners. To get the right financing product for your business these are some of the important factors to consider.

Application process

Lenders are now able to apply for inventory loans online. This helped to make the process more convenient and transparent.

Most funders allow business owners to complete their application, select their loan amount and repayment terms. Lenders are also able to get approval from as little as a few hours to a few days.

Business Financial Records

All lenders will scrutinise your financials to ensure that you are able to repay your loans. In the case of inventory loans, lenders want to see strong sales performance records and that you will be able to sell all the stock you buy.

Some of the financials they will want to take a look at are:

  • Balance sheet, including sales history
  • Profit and loss statement, including revenues, costs, and expenses your business incurred during a specific period of time.
  • Business bank statements
  • Sales forecast
  • Cash flow statement

Type of Business

Only product-based industries can access inventory financing. Some examples of businesses that require inventory loans are retailers (from shoes and clothing to beauty products and toys) and wholesalers who sell large quantities of products sold at prices lower than retail.

Inventory loans are ideal for businesses that experience seasonal fluctuations and have busy and quieter periods, examples are back to school products or sporting goods.

Business Needs

Inventory financing is a very specific financing solution so a lender has to be very clear that inventory is the source of business need.

In addition to identifying your exact cash flow gap, it’s also important for business owners applying for an inventory loan to know that they will be able to sell the stock you buy. This can be done by assessing previous sales data and completing a sales forecast.

Benefits of Inventory Finance

  • Allows you to meet customer demand
  • No need for collateral
  • Quick application and approval process
  • Bridge cash flow gaps
  • By turning to lenders for inventory financing, companies don’t have to rely on their business or personal credit ratings or history
  • most lenders only require companies to be up and running for a minimum of six months to a year in order to qualify. This allows newer business owners to access credit quickly.
  • Take advantage of inventory discounts.
Compare our best picks
Retail Capital
Click here

Pros

Flexible repayment options.
Discount to the balance of your fees pro-rata when you settle early
Tax benefits when you take out an asset finance loan.

Cons

Shorter Loan Terms
Limited Loan Products

Retail Capital focuses on providing alternative lending solutions for small and medium sized businesses.

GroWise Capital
Click here

Pros

Flexible repayment terms.
Custom funding options for your business needs.
Quick approval rate.

Cons

Not many funding options.
Limited amount of funding capital available.

GroWise Capital is an online lending platform for entrepreneurs and SMEs. The company helps small businesses by providing an easy funding application process and quick turnaround times for approval. GroWise Capital also provides SMEs with tailored funding options to fit individual funding requirements.

Lulalend Inventory Loans
Click here

Pros

No collateral is needed.
No long queues or extensive paperwork
Transparent, flexible terms
Access to finance in 24-hours

Cons

The affordability assessment
Potential for Overstocking
Focus on Short-Term Needs
Limited Loan Amounts

Lula is an online lender that offers a variety of unsecured business funding options including retail financing and inventory loans. They provide quick, easy short-term funding through an online interface.

SME Solutions Newsletter

Practical tools, insights, and strategies for every stage of your business journey.

Subscription Form | Solutions

Report

Harassment or bullying behavior
Contains mature or sensitive content
Contains misleading or false information
Contains abusive or derogatory content
Contains spam, fake content or potential malware

Block Member?

Please confirm you want to block this member.

You will no longer be able to:

  • See blocked member's posts
  • Mention this member in posts
  • Invite this member to groups
  • Message this member
  • Add this member as a connection

Please note: This action will also remove this member from your connections and send a report to the site admin. Please allow a few minutes for this process to complete.

Report

You have already reported this .

Stay in the loop

Stay in the loop