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:

• It’s a quick way to become liquid and get stock moving
• They protect you from market volatility
• Loans for stock purchase are a good way to get products ahead of busy periods for sales, like Christmas
• You should get a fixed interest rate
• The whole process should take about 2-3 working days, so you can get started promptly. There are some companies who claim to be able to work even faster, which is useful if you get a surge of interest in your business and you need to increase supply
• Covering your product purchases with a loan frees up money to invest in training, premises or anything else you like
• If you’re buying stock from a place with different currency, banks can often pay in that currency and prevent you from being overcharged on exchange rates
• You may be able to buy larger amounts in bulk, which could allow you to negotiate a discount and increases your purchasing power
• Working with banks means spending time with other people who know the industry and may be able to make useful suggestions for your business. Some financiers will also offer deals specialised to your specific sector

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.