See Financing for general explanation.

Inventory financing is generally a revolving line of credit facility that requires only the interest payments on the borrowed amount and no principal payments. Cash flow of the business improves because there are no principal payments. Hence, this is a preferred form of financing over term debt that requires principal
payments.

Banks typically finance inventory if the business has accurate records, and if adequate systems and controls are in place to track it. The Advance Rate on inventory and the cost of such lending depend on many factors including the type of industry, the customers, the composition of inventory, general economy, etc.
Advance Rate is higher on raw materials inventory and finished goods inventory, and low on work-in-process (WIP) inventory. BVX does not allow Advance Rate
input for individual components of inventory; hence a blended Advance Rate should be used.

•    Revolving line of credit against Inventory is often not available for small businesses.
•    Enter % Advance Rate on the inventory amount entered in Inventory and the % interest cost on this financing. Do not type the % symbol.
•    BVX calculates the amount of inventory borrowing by multiplying % Advance Rate with the inventory amount entered in Inventory.
•    BVX maximizes revolver borrowing if it will help maximize the Enterprise Value.
•    BVX uses inventory financing only if it is needed. It borrows against inventory after it has fully borrowed against account receivables. (Also see Borrowing Priorities.)
•    If Inventory comes down so does the inventory borrowing. However, if inventory goes up BVX borrows only if it is needed and only if Open Revolver Credit Facility is available.
•    BVX pre-pays Inventory borrowing per Pre-payment Sequence.