Partners review each order once it is talked through at (937) 588-8988.
Inventory financing pays for goods a business holds before they sell or go into a job, and the goods can serve as the security. The worked order on this page is invented: 65% of a $21,400 parts order funded at 13.8% a year and paid down over five months. Repair bills, tooling that wears out in weeks and payroll belong on other funding types.
At a glance
- Pays for
Stock held for sale or for jobs
- Security
The goods, if a partner asks for it
- Paid down
As the stock ships or is used
The working cycle of inventory financing for raw materials at a Shelby County, OH machine shop
A machine shop that wins a run of parts has to buy the bar stock, plate or castings before the first part is cut, while the customer pays only after the parts ship. Inventory financing fills that space: a funding partner pays for, or advances against, the raw material, and the shop pays the balance down as finished parts leave the dock and invoices are paid.
- The shop names the material, the supplier and the job it feeds.
- A funding partner decides what share of the material's cost it will fund, if any, and on what terms.
- The supplier is paid, either by the partner or by the shop with the funds.
- The material moves into production; a partner may ask for stock reports while it is on hand.
- As finished parts ship and invoices are paid, the shop pays the balance down.
County Business Patterns counted 1,136 paid employees at the 37 fabricated metal product manufacturing establishments in Shelby County, OH for 2023 (NAICS 332, the group that takes in machine shops). For shops in that group, metal bought ahead of a run is a cost that returns with every new order.
What separates one inventory financing company from another when a Sidney, OH supplier wants payment
A Sidney, OH request goes on to funding partners, and the ones that offer inventory financing can differ on several points. Putting two offers next to each other on these lines shows the difference before anything is signed:
| Point | What to look for in the offer | Why it matters to a shop |
|---|---|---|
| Share of cost funded | The percentage of the supplier invoice the partner pays | The shop covers the rest from its own cash |
| Security | Whether the stock alone secures the funding or a wider lien is filed | A wider lien can reach other business assets |
| Reporting | Whether stock counts or reports are due while the balance is open | Reporting takes staff time each month |
| Paydown | Whether payment is due as goods sell, on fixed dates or at the end | A fixed date can arrive before the customer pays |
| Total cost | Interest, any fees and the total to be paid | Two offers with similar rates can cost different totals |
The supplier may also offer its own payment terms on the invoice, which is a separate arrangement between the shop and the supplier. Wholesale trade establishments with a ZIP 45365 address numbered 22 in 2023 (ZIP Code Business Patterns, NAICS 42); local or not, a supplier's invoice date is what sets when the money is needed.
An invented parts-room order for a Sidney, OH auto repair shop: an inventory financing example, worked line by line
Illustration only, invented figures. A Sidney, OH auto repair shop restocks brake pads, rotors, filters and batteries with an invented $21,400 order. In this invented case a funding partner advances 65%, or $13,910, and the shop pays the other $7,490 itself. Interest runs at 13.8% a year in the invented terms, charged each month on the balance, and the shop pays $2,782 of principal each month as the parts go into repairs.
| Month | Interest charged | Principal paid | Balance after payment |
|---|---|---|---|
| 1 | $159.97 | $2,782.00 | $11,128.00 |
| 2 | $127.97 | $2,782.00 | $8,346.00 |
| 3 | $95.98 | $2,782.00 | $5,564.00 |
| 4 | $63.99 | $2,782.00 | $2,782.00 |
| 5 | $31.99 | $2,782.00 | $0.00 |
In this invented case the interest across five months comes to $479.90, on top of the $13,910 paid back. A shop whose parts sit longer on the shelf carries the balance longer and pays more interest; one that uses them sooner pays less.
County Business Patterns counted 13 automotive parts, accessories, and tire stores in Shelby County, OH for 2023 (NAICS 4413), the code that covers the retail parts counters a repair shop may restock from.
What inventory financing covers at a Sidney, OH machine shop, and why a repair bill sits on a different product
Inventory financing is funding tied to goods: raw material waiting for a job, purchased components, and finished parts waiting to ship. Because the goods have resale value, a partner may take them as security. A repair bill is different. When a Sidney, OH machine shop's lathe needs a new ball screw, the invoice pays for a service, not for goods on a shelf, so there is nothing for the partner to hold.
- Fits: bar stock, plate, tubing and castings bought for a run
- Fits: purchased components such as fasteners and bearings that go into assemblies
- Fits: finished parts on the shelf waiting for a customer's release
- Elsewhere: a repair invoice, which a working capital loan can cover
- Elsewhere: a new machine, which belongs on equipment financing
What the money buys draws the line between these, and the partner makes the final call on what it accepts as inventory.
Purchase order financing, shown with an invented bracket order at a Sidney, OH machine shop
Purchase order financing is built around a confirmed customer order: a funder pays the supplier for the material or goods needed to fill it, and the customer's payment settles the balance. It is not one of the six funding types arranged through this site. The same confirmed order can still back an inventory financing request or a draw on a line of credit, and a partner decides whether it does.
Illustration only, invented figures. A Sidney, OH machine shop receives an invented $46,900 purchase order for welded brackets. The invented steel and hardware bill is $18,350. In this invented case a partner funds 60% of that bill, $11,010, at 14.4% a year in simple interest, and the shop puts in $7,340. If the balance stays open for 45 days in total and the shop clears it the day the customer pays, the invented interest is $195.47.
A partner may look at the order itself because it shows where the money to clear the balance comes from; the order alone does not settle whether an offer is made.
The blog article on supplier payment plans and bar stock for a long contract sets supplier terms beside a line draw for the same Sidney, OH shop floor.
By Drifthaven Business Capital ยท Updated