How do I explain a tire shop’s inventory buildup to a lender?

A rising inventory line makes a lender ask whether the money is tied up in stock that will sell or stock that will sit. The best response is a clear breakdown. Split inventory by category, such as winter, all-season, summer and specialty, and by age on the shelf. Show how much sold recently and how quickly. A lender can then see which part is working and which part is not.

Explain the reason for the buildup. In a tire business, buying ahead of the changeover season is normal, and a supplier’s early order programme can justify a larger position. If that is your situation, show last year’s pattern so the lender can see it repeats. If part of the stock is slow, say so, and describe what you are doing about it, such as promotions, supplier returns or adjusted ordering.

Finally, link inventory to cash. Show how stock is paid for, what supplier terms you have and how the cash cycle works through the season. Your accountant can prepare a short schedule showing inventory, payables and sales together. If you are asking for financing against stock, ask the lender how it values and monitors inventory. Bring a recent physical count, so the lender sees the numbers rest on what is actually on the racks.

Key takeaways

• Break stock down by type and age on the shelf.
• Explain the cause with last year’s seasonal pattern.
• Show the plan and timeline to bring levels down.