Business Loans Guide
Loan To Purchase Stock
How to source the ideal loan to purchase stock
Stock is an integral part of many businesses and in many situations is the most significant asset the business owns. Whether you run a distribution company, a manufacturing business, provide wholesale items, or run a retail operation, your business will rely on a steady supply of stock to meet business demands.
A loan to purchase stock can be an efficient way for your business to raise the capital it needs to invest in new inventory. Through our range of lenders, we can provide a variety of loans to purchase stock, which we will discuss in this useful guide.
The benefits of taking out a loan to purchase stock
To ensure your business is a success you need to have a steady supply of stock, to meet customer orders and also maintain your reputation. To reduce the pressure on your business it is advisable to maintain buffer stock, as it can help your business cope with variations in demand.
By preparing for seasonal fluctuations you could increase your profits and protect your reputation, by ensuring your business always has the stock to cope with demand. Without a steady supply of stock, you could lose customers which will lead to profits decreasing and could eventually make or break your business.
It may even be possible to take advantage of low prices, discounts or special offers. However, not all businesses have the capital ready to purchase stock at the most convenient times. Instead, a loan to purchase stock could help you purchase the inventory you require at the best price possible.
What loans to purchase stock are available?
Here at Business Comparison, we specialise in providing competitive loans to every type of business, by making it quick and easy to compare the available options. With over 30 lenders in our panel we can offer a range of competitive loans, for both short and long-term requirements. The ideal loan to purchase stock will depend on a variety of factors, such as how much you need to borrow and how long for.
By partnering with traditional high street banks, online lenders, challenger banks and alternative lenders, we can offer both secured and unsecured loans, starting from a minimum of £1,000 to a maximum of £20,000,000.
A fixed term loan is the most common loan to purchase stock, as the interest rates tend to be low with repayment terms set to anything from 1 month to several years. The loans we provide are designed to suit businesses of all sizes, so whether you are just starting out and need to fund a small inventory, or are a large established business requiring a significant amount of stock, our lenders can help.
If you are looking for a quick loan to purchase stock, there are alternative options available including credit cards, overdrafts and lines of credit. These types of loans tend to be offered for smaller amounts, but the processing time can be as little as 24 hours. If you are unsure how much stock you need to purchase, these are ideal options as the lender will provide you with a maximum limit, but you only need to spend what you need. This flexibility can result in a very low-cost form of borrowing, as the interest charged will depend on how much you have spent.
How to compare loans to purchase stock
If you are considering a loan to purchase stock, our finance finder is designed to make it easy to find finance which is suitable to your business needs. Our comparison tool will ask you a variety of questions about your business including its trading patterns, monthly turnover, the amount you require and how long you need to repay the loan.
The tool will then provide you with a list of potential finance options, so that you can find the ideal loan to purchase stock. The list of lenders will include details of the various interest rates and terms, with the most suitable match at the top of the list. The availability of the loans and their individual terms will depend on a variety of factors, such as your credit rating and financial situation.
Once you have found the ideal loan, the application process is very simple and will take just a few minutes to complete. The lender will ask you to provide a range of documents such as bank statements, cash flow forecasts, profit and loss statements and a comprehensive business plan. To ensure you access a loan to purchase stock as quickly as possible, you should prepare these documents in advance of your loan application.
The lender will want to build up a complete picture of how your business is operating, alongside its potential for the future. Providing a business plan is your ideal time to show how purchasing the stock will benefit the business. Aim to show how the stock will be sold and its effects on the business’s profits, as this will show that the repayments on the loan can be met.
The lender will then complete the underwriting process and send the agreement for you to sign and return. Before returning the agreement, you should pay close attention to the terms as lenders may charge fees for arranging the loan, missing payments, or even repaying the loan before the end of the agreed repayment term.
Is my business eligible for a loan to purchase stock?
Generally, if a loan to purchase stock is deemed to be high risk, it will cost you more to borrow the funds. The credit rating of your business will be the most significant factor in determining your interest rate. If your credit rating is low, the risk will be passed on to you with by charging a high interest rating and often a shorter loan period.
In some circumstances you may not be approved for an unsecured loan to purchase stock, instead the lender may offer you a secured alternative. This will require your business to provide your assets as collateral for the loan, as a way to reduce the risk to the lender. In most situations you will be offered a loan which is based on the value of your assets, if your business then defaults on the loan your assets will be sold to recoup the missed repayments.
However, not all businesses have the assets required to secure a loan to purchase stock, especially those who are just starting up. In these situations, if your business credit score is making it difficult to secure finance, you could provide a personal guarantee.
If your own personal finances are strong, or you have personal assets which can be used as collateral, you may be able to access a loan to purchase stock for your business. However, this effectively makes you personally responsible for paying the loan, so if payments are missed you could lose assets such as your home, car or other valuable possessions.
In addition to loans designed specifically for the purchase of stock, we can also offer an array of alternative short and long-term loans. To find out more about the options available to your business when purchasing stock, please contact our team today.