Inventory financing: how to go from book value to real value (and maximize your LTV)
In industry, an error always comes up when a manager seeks to finance his stocks: he presents his inventory at its book value.
However, for a funder, the question is not:
“How much did this stock cost you? ”
But rather:
“How much would it be worth if we were to resell it tomorrow? ”
This nuance changes everything.
In the white paper Industrial stocks: Unlock dormant capital , SOKA Finance insists on a key point: the ability to transform inventory into financing depends on its real market value, not on its historical purchase price.
1. Book value vs liquidation value: a strategic gap
Book value is internal data. It is used for your balance sheets.
The funder, on the other hand, reasons Net Realizable Value (NRV), that is, the net realizable value:
Estimated resale price
— transport costs
— storage costs
— commissions
= liquidation value.
It is this base that determines the possible financing.
👉 Direct consequence:
Two businesses with the same stock level can get very different amounts.
2. Not all stocks are created equal
The white paper distinguishes between three main categories:
Raw materials
Often the most appreciated by funders.
Why?
- Liquid secondary market
- Known prices
- Standardization
- Low risk of obsolescence
Metals, polymers, standard components... these are real financial assets.
Semi-finished products
More complex.
Their value depends on an uncompleted production stage.
Result: strong discount.
Finished products
They can be of good value...
But be careful:
- Fashion risk
- Risk of obsolescence
- Dependence on the order book
A poorly positioned finished stock can become illiquid very quickly.
3. Loan-to-Value (LTV): the key metric
The central ratio of inventory financing is Loan-to-Value.
LTV =
Financed amount
÷
Liquidation value
According to the white paper, an LTV can reach 80 to 90% according to the liquidity of the asset.
But this level is not obtained by chance.
It depends on:
- The quality of the stock
- The rotation
- Traceability
- Price stability
- Legal structuring
A well-segmented and properly presented inventory can earn several LTV points.
On a financing of €10 million, this represents hundreds of thousands of euros.
4. The valuation audit: an underestimated step
This is where many manufacturers lose potential funding.
A simple ERP export is not enough.
A professional funder will analyze:
- Rotation history
- Seasonality
- Supplier concentration
- Sensitivity to raw materials
- Insurance conditions
In the white paper, SOKA Finance explains working with sector experts to “sell” the quality of the asset to the funder.
In other words:
It's not just a financial record.
It is a strategic persuasion operation.
5. What does this change for your BFR
Your Working Capital Requirement depends heavily on the level of stocks.
Transforming 70 to 80% of their value into immediate liquidity allows:
- To reduce banking pressure
- To absorb an increase in raw materials
- To negotiate volume purchases
- To secure rapid growth
Inventory financing is not an emergency tool.
It is a lever for active management of working capital.
In summary
Going from book value to settlement value is the first strategic step in successful financing.
It is not a purely technical exercise.
It is a complete review of your balance sheet from a market perspective.
The white paper details the 5 complete stages of this transformation and the concrete mechanisms used by more than 50 manufacturers supported by SOKA Finance.
If you have large stocks, the real question is no longer:
“Can I finance them? ”
But:
“Am I underexploiting a strategic asset? ”
👉 Do you want to understand which structure (pledge with or without possession, backed bond, tailor-made arrangement) is the most suitable for your business?
The white paper “Industrial stocks: Unlock dormant capital” deciphers in detail the legal and financial mechanisms that secure financing while maintaining your operational agility.
📥 Download the white paper and find out how to turn your inventory into a sustainable driver of growth.
