Transaction
Line of credit for a direct-to-consumer retailer.
Published financing features
- 70% inventory margin with no limit on line value
- Very minimal personal guarantee
- Prime + 0.50%
Published client benefits
- Ability to increase sales by over 40% through more inventory
- No limit on inventory-to-line margin card
- Increased percentage allocation on inventory
- Competitive pricing
How this kind of financing works
An inventory-backed line of credit advances against stock on hand at an agreed margin rate. For a retailer, that rate and its ceiling decide how much of the year's demand can actually be bought. A facility that advances a healthy percentage but caps the line in absolute terms will constrain a business at exactly the point it starts working — the cap binds before the margin does.
Removing the cap changes what the facility is for. Where availability scales with inventory rather than stopping at a fixed number, a retailer can buy into demand instead of rationing against a limit, which is the difference between meeting a season and missing part of it.
Pricing is generally quoted as prime plus a margin, floating with the lender's prime rate. Personal guarantees are a separate negotiation from rate and are worth treating as one: the extent of a guarantee, not just its existence, is normally open to discussion, and reducing it can matter more to an owner than a small difference in spread.
Historical example only. It is not a promise of terms, availability, or results for a future transaction.
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