If you sell goods and are struggling with cash flow, you should look into loans for stock purchase. It can help you buy the stock or inventory to keep your business running. These can also be used to re-negotiate contracts with suppliers to get better deals. Here, we’ll offer you all the information you need so you can understand the concept, learn where to go for a stock purchase loan, know what you should have when applying for credit, understand the advantages and disadvantages and anything else you might require.
Contrary to what you might expect, if you apply for a loan for stock purchase, no money goes directly into the company’s bank account. Instead, the lender will pay money directly to your company’s supplier in exchange for a set quantity of goods, which you then sell on. The bank themselves would be named on the invoice. For example, if you run a bike shop, you might apply for a loan for stock purchase to buy, say, 100 bikes. The bank would pay the bike manufacturer, the bikes would be delivered to you, and you would then sell them on at a profit, and repay the bank, plus interest. This can be scaled up as you require, and different lenders will be able to assist you.
This is worked out via percentages. You can borrow up to 100% of the price of the stock, and then interest on that is usually between 1.2%-3% for every 30 days until the money is paid back in full. So for example, if you borrowed £10,000 for a month, you would pay back £10,300. This is a simplified example, and you need to make sure that you get clear estimates when you apply.
Loans for stock purchase often have additional fees, so you need to read through the paperwork thoroughly to make sure you’re not going to end up with an unmanageable amount of debt. You would usually be expected to repay the loan within four months, so keep this in mind if you have a product which takes time to move. All of this should be discussed with the lender when you apply for the loan.
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Banks will typically look at how good your suppliers are, and how profitable your business is. There may be some discussion of possible pitfalls, so make sure you’re all brushed up on your strategies. They need to make sure that they’re investing in something high quality and easy to sell on, so they’re not left with products and you don’t default on your payment. You will need to be able to show a past record of sales and purchases, so loans for stock purchases are not suitable for new businesses or startups.
You will also need to meet certain criteria to be eligible for a loan for stock purchase. The company should be registered in the UK and the director should be a UK resident. You’ll need to have bought products from the proposed wholesaler beforehand, and many banks will ask you to prove a relationship of at least one year. There may be additional requirements, depending on which lender you decide to go to.
There are lots of great things about this type of financing, such as:
Trade finance is similar to loans for stock purchase in that both cases, creditors will lend money to businesses which goes directly to the manufacturers of products, but with trade finance, the products already have buyers. For example, if someone purchased a bike from a bike shop, they might wait a few days for it to be delivered. This would give the bike shop time to go to a bank, apply for trade finance, and then receive the bike to pass on to the buyer. Loans for stock purchase work on the assumption that your business will hold on to the physical product for some time, possibly in a warehouse or in a shop, before being purchased by a customer.
If you’d like to try this method of financing, you’ll need to contact a bank or other financial organisation. They will ask some questions about your business, from mundane things like your address to more complicated issues like your projected profits for the next year and a full description of your USP and what your day to day operations look like. This form can usually be done online, although you should be able to speak to someone if you want. This is recommended, so you know all of the details of your contract. The bank will then contact you to discuss your form and let you know if you’ve been approved.
It’s also likely that the creditors will want to see a profit of more than 20%. If you’re using the opportunity of a loan for stock purchase to convert currency or buy in bulk, you should take this into consideration and make sure that it’s clear when you submit your application. Banks may ask why you’re buying excess stock, so you need to explain the increased demand or decreased price.
In some cases, you may also need a guarantor who owns a home in the UK, with the understanding that they may be liable if you are not able to move the products. If you are not the guarantor, it is a good idea to make sure they have copies of all documents and an opportunity to speak to the bank when you discuss the loan.
Working out cash flow problems can be a challenge for businesses. If you’re not liquid, you might struggle to buy stock to convert into profit, which is extremely frustrating. Loans for stock purchase are a great way to resolve this problem, and comes with the added benefit of allowing you to trade in different currencies and get better deals than you would if you were alone. If you’re looking for a way to buy goods more efficiently and increase your profits, loans for stock purchase might be perfect for you. Please be aware that all of this information is for businesses in the UK and may not apply to other areas.
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Lenders make small business loans, especially for small businesses that don’t have lots of assets or cash in reserve. That means that they often need to borrow money at affordable rates to solve short-term cash flow issues, or if they need to invest quickly in an opportunity. Small business loans tend to be flexible and offer choices of repayment options.
Lenders understand that small businesses face unexpected issues with their finances. You can use small business loans to help with temporary cash flow problems, like a late-paying client or an unexpected bill. You can also use finance to help your business grow and invest in the future. For example, when you want to buy stock and equipment to cover a rush of orders.
Lenders make small business loans to suit the needs of a range of small businesses. Whether you have a Limited Company, a start-up, or you’re a sole trader, there will be a loan that suits your needs. Some lenders offer loans for people with poor credit or unusual circumstances. That’s where using a loan broker like LoanTube comes in handy.
Small business loans can cover a variety of UK business needs. Secured loans usually give you lower repayments and let you borrow more, but you could lose your collateral if you can’t keep up repayments. Unsecured loans give you faster access to money with fewer checks. However, you pay a higher rate of interest and often can’t borrow so much. As well as these, you could choose Business Credit Lines or Revolving Credit Facilities. These types of loans give you access to credit, like an overdraft, but you don’t have to use all of it. Furthermore, you only pay interest on what you borrow.
Depending on the type you choose, your repayments could last a few months to up to five years. Usually, the shorter the term of the loan, the greater the repayments are. Most people want to pay their loans off as soon as possible, however, it’s often better to have affordable monthly repayments for a longer term than struggle with fewer, unaffordable repayments.
You can find it hard to get finance if you have bad credit or you’ve been turned down by lenders in the past. However, some lenders specialise in bad credit loans and will give you finance if they are happy that you meet certain criteria. That’s when using a loan broker, like LoanTube, can be helpful. LoanTube will search the market for you and advise you on lenders likely to give you credit, saving you time and applications.
We know the loan market can be confusing. There are so many lenders and loan products, it’s hard to know where to start, and no one wants to be turned down for credit. When you choose a loan, you need to make sure the repayments are affordable. You also need to know what will happen if you can’t keep up repayments, or if you want to repay early. LoanTube explains the different options open to you and we give you our expert advice.
If you need money fast, you could get a quick loan within 24 hours of applying, as long as you meet the lender’s requirements. Often, repayment interest will be higher than other small business loans and you may need to repay what you owe more quickly.
LoanTube works with many lenders across the United Kingdom. You could borrow between £5,000 and £500,000.
LoanTube helps UK firms access business finance through multiple direct lenders. We are an introducer and do not provide loans ourselves.
Think carefully before securing debts against your home or your assets. Your home and assets may be repossessed if you fail to keep up with repayments on debts secured against it.
All loan approvals & quotes are subject to credit checks and affordability requirements by lenders. If your business meet the lender’s criterion, you can borrow the money. We as a broker make an attempt to process your application with the most suitable lenders in our panel.
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Warning: Late repayment can cause you serious money problems. For more information, go to MONEYADVICESERVICE.ORG.UK
The rate you are offered will depend on your individual circumstances.
Representative APR Example: Amount of credit: £50,000 for 24 months at £2,339.38 per month. Total amount repayable of £57,348.69 Interest: £7,348.69 Interest rate: 14.4% pa (fixed).
14.4% APR Representative. Loan term lengths between 3 and 60 months.