Looking for inventory or receivables debt financing options

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April 30, 2024

by a searcher from University of Virginia-Darden - Darden School of Business in Charlottesville, VA, USA

We have a B2C and B2B niche clothing company under LOI and want to explore inventory and receivable debt financing options. Our closing date is in the next couple of weeks. Any debt financiers interested in this type of deal I would be interested in talking.

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Reply by a searcher
from Emory University in Tucson, AZ, USA
The apparel industry typically uses factoring and has a variety of specialists specific to the industry, from small to larger institutions like CIT. There's probably new twists to this relatively expensive financing method. One twist, if you are selling to large retailers, is some now offer earlier pay by extending them a discount (it's done through an auction like system, you calculate your cost of capital versus the early pay discount, etc.).

Another option to consider is buying a trade credit insurance policy. This covers the receivables with a rider naming the bank as the beneficiary, increasing the chances the bank will lend against the a/r as collateral. Try Natalie Palmer at Meridian. redacted My partner Jeremy Black has worked with her as our broker for A/R and trade risk policies. She may have options in her network that are better than recourse factors.
If you are working with factories they can be a great tool for improving cash flow through longer payment terms, etc. This is best accomplished by being at the factory, building a relationship, paying them earlier than agreed upon when cash flow is strong, etc.
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Reply by a lender
from The University of Michigan in District of Columbia, USA
^redacted‌ thanks for pinging us. That's a tight timeline. If you can get an extension and we have at least 4 weeks, feel free to reach out to me directly at redacted An asset based loan of this type would have to be led by the A/R, with inventory supporting it (i.e., we can't lend against only inventory).
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