![]() ![]() According to FreightWaves, the worst-case scenario for carriers is a collective loss of $23b this year. In addition, it is estimated that container lines are losing revenue of up to between $300m to $350m as they blank sailings. There is a potential loss of 10% of shipping volume due to COVID-19 (roughly a loss of 17 million carrier TEU). ![]() It has now become more apparent that with the lockdown in China in January, and the subsequent lockdown of Europe and North America, that demand for ocean freight has simply dropped. Initially, 2020 was met with optimism in late 2019, with the only concerns being for IMO 2020 with extra charges and the cost of installing scrubbers. The last five years have not been stellar for ocean carriers as they feel the burden of having smaller rooms of error for losses. Shipping has taken hard knocks since January 2020. This only works for businesses that have a stable and robust sales cycle for their products.Current Situation with COVID-19 and Shipping Best suited to manufacturers or commodity businesses that sit close to their supply chains.Ĥ ) Inventory Factoring: The lender discounts purchase orders to buy the inventory to meet these orders. If the borrower defaults, the lender takes the inventory and sells it.Ģ ) Inventory Line of Credit: A financing method that can provide your business with an ongoing source of extra capital as you need it, which is good if you frequently have unpredicted expenses.ģ ) Warehouse Financing: The borrower transfers all of the inventory being used as collateral to a warehouse and the lender has some control over the movement of goods. Loan against inventory, or a short-term loan as a specific percentage of the inventory’s value.Loan for inventory, where the inventory is used as collateral but the loan still requires a down payment, meaning the interest rates will follow the industry benchmarks.While the concept of inventory financing is pretty straightforward, there are different kinds for different situations:ġ ) Inventory Loan: A loan based on the cost of the inventory in question, usually between 50 to 90% of the inventory’s value, paid back in fixed monthly payments or a lump sum after all the inventory is sold. Or, in the worst-case scenario where you don’t sell all your stock, the lender can simply take the remaining inventory and sell it themselves.Ĭommon types of inventory financing and how they work You don’t have to pay back the lender until after you sell off all your inventory. The solution? You put up the inventory you wish to buy as collateral for the purchase itself to ensure you have ample stock. The problem is: you don’t have enough capital to cover the cost of this inventory, and you’re not too keen to stake your house or car on a bank loan in the event your customers have sworn off exercise and you can’t unload all your stock. In order to meet demand, you need to buy an especially high amount of inventory ahead of January. The new year is always your busiest season, as customers want to get rid of all that weight gained over the holidays. You purchase your inventory from a vendor based in China. Let’s say that you are a mid-sized retailer of high-end exercise equipment in Seattle. Sound confusing? Let’s break it down through an example. To put it simply, inventory financing refers to using the inventory you need to purchase as collateral for itself.
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