Inventory Financing for Hendersonville, TN Physician Offices: Stock, Parts and Supplier Orders

Illustration only, invented figures: an HVAC contractor wants 20 condensing units on the shelf before a run of replacement jobs, at $2,150 each from its distributor, a $43,000 supplier order. A partner advances 80% of the cost, $34,400, and the contractor covers the other $8,600 from its own cash.

1. The partner pays the distributor, or pays the contractor against the invoice, and takes a lien on the 20 units.
2. Each unit installed releases $1,720 of the advance to be paid back, from the job’s own invoice.
3. If all 20 units are installed by day 60, interest at an annual rate of 12% on the full advance would come to no more than about $678.58; paying down unit by unit lowers that.
4. Units still on the shelf at the end of the term follow whatever the agreement says: a paydown, a renewal or a fee.

The structure only works when the stock turns into paid jobs. A contractor that holds condensers for months pays interest on equipment that is earning nothing.

For an auto repair shop, inventory financing is money for the parts room, secured by the parts themselves. Filters, brake pads and rotors, belts, batteries and tires are the kind of stock it covers. A partner can value that stock at less than what the shop paid for it, since used or slow-moving parts are worth less if they have to be sold off, and advances against that value.

It differs from a credit line in one way that matters: the collateral is the stock, and the partner may want inventory reports or a count from time to time.

Repair work in the county runs on a sizable workforce: automotive repair and maintenance establishments in Sumner County, TN reported 668 paid employees in 2023 (County Business Patterns).

Purchase order financing pays a supplier for goods that are already sold, against a specific customer order. Inventory financing pays for stock before any customer has ordered it. For an HVAC contractor, a signed commercial contract that calls for a set of rooftop units is a purchase order case; a shelf of residential condensers is an inventory case.

Not every partner offers purchase order financing; that is worth raising on the call.

The mechanics come down to a few steps, and the agreement fills in the numbers:

1. A supplier quote or invoice sets the cost of the stock or parts.
2. The partner sets an advance against that cost, a share it decides, and the business covers the rest.
3. The partner pays the supplier or the business and files a lien on the inventory.
4. As units sell or go into jobs, the business pays down the advance, by unit or on a schedule.
5. The partner can ask for stock reports and charges interest and fees as the agreement states.

Plumbing, heating and air-conditioning contracting is an established trade locally, with 580 paid employees across 61 employer establishments in Sumner County, TN in 2023 (County Business Patterns, NAICS 238220).

Inventory money for an HVAC contractor can come from several kinds of sources, each with its own trade-offs:

• Distributor and manufacturer credit programs, which can tie the financing to that supplier’s products.
• Banks and credit unions, which can offer a line secured by inventory and receivables.
• Specialty inventory and asset-based finance companies, which can look more closely at the stock itself.
• Funding partners reached with one call or one request form through this site, each setting its own terms.

The office ZIP has a count of its own: for ZIP 37075, ZIP Code Business Patterns lists 23 plumbing, heating and air-conditioning contractors with employees in 2023.