Inventories are goods or commodities that occur in the business’s operating cycle. Moreover, its management represents a lever of competitiveness of the most important for companies. Indeed, it is important to guarantee all the orders and to limit as much as possible the costs related to storage. Thus, finding the ideal stock level is crucial for finding the best stock finance for the business.
Different types of inventory financing
Also called ” advance on stock “, inventory financing can be done in a traditional or innovative way.
Classic financing solutions
Warrants with or without delivery
- The warrant is a promissory note validated by the company which pledges the goods available in the general store or placed in a fictitious warehouse.
- It may also be a transferable contract giving the holder the right to buy or sell specific assets. The quantity, price and maturity date of these assets have of course been defined in advance.
- The warrant is also a derivative product associated with an underlying support. It can also be in the form of shares, bonds, currencies or commodities.
The aging inventory credit
This type of depreciable financing relates essentially to the wine-growing activity. It is a 2- to 3-year medium-term loan aimed at financing the stock and the need for working capital during the aging period. Made in the framework of a national agreement, it gathers three inseparable actors:
- Merchant producers: identification and transmission of a statement of stocks allocated as collateral.
- Customs administration: verification and confirmation of the quality of the beneficiary trader, registration of the guarantee commitment, monitoring and control of the volumes pledged.
- The bank: devel
New ways of financing stocks
In general, the most commonly used innovative financing is:
- The discovery
- Financing by ticket
- The warrants
Contest offers are insured by the stocks themselves. But, sometimes, they can also be accompanied by the commitment of a mutual guarantee company and the approval of the head of the company. The financing concerns a share of the value of the stocks. This being to mitigate a possible degradation of the courses.
These financing methods use all the resources of financial optimization, namely:
- Stock securitization (part of a Private Equity close private equity issue)
- Deal clubs (it is up to the borrower to choose his financial partners whether for the contribution of capital or the granting of a loan)
- Mutual funds in the public (through a bank’s wealth management service)
Good to know
A watering clause is most often provided for in the contract. It imposes on the borrower the issuance of additional guarantees in case of depreciation of the asset put in guarantee. Of course, this is to respect the financing / guarantee ratio that the contract has provided.
The pledge or the guarantee on stocks
The stock guarantee is an operation that allows a company to pledge lines of finance to a stock of goods, finished goods, semi-finished goods or raw materials. If a contract is taken out during the suspect period, it may be called into question.
The different kinds of guarantees on stocks
The pledge with dispossession
It is the safest stock guarantee. And for good reason, it can be opposable to all creditors for most transactions. Moreover, the most privileged creditors such as the Treasury or employees do not escape this rule.
Much less secure than the collateral on dispossession stocks, this type of pledge has no value in the event that the company comes to be liquidated.
The nature of the stocks pledged
All stocks can be pledged: capital goods, vehicles, computer equipment, electronics, textiles. It is the same for perishable goods that can be frozen such as agricultural and food stocks. Moreover, even the claims of the Treasury can be used as collateral.
Gage on stocks: the advantages and constraints
The interests of this type of financing
- This is ideal for SMEs that go through periods of cash needs that exceed their trade receivables.
- The nature of the products that can be pledged is diverse and varied: raw materials (commodities), goods, finished and semi-finished products.
- Unlike an overdraft, it is significantly less expensive.
What about the disadvantages?
- The administrative procedures are consequent: drawing up of a legal act, carrying out of an audit, control and follow-up of the stock.
- The credit granted is limited in time: it ends at the same time as the sales of products and goods.
A few words on the warrants of the general stores
General stores are private establishments which enjoy the approval of the administration. This one obviously takes care of controlling them. Aimed at farmers, traders, artisans and industrialists, they serve as storage places for goods, manufactured products and raw materials.
Thanks to the securities they issue, they allow the owners of deposits to perform two legal transactions. It’s about selling and pledging. In addition, these negotiable securities or warrants must be deposited in the Registry of the District Court. Otherwise, they can not be opposable to third parties.