Empowering the Solar Revolution: The Role of Inventory Finance

Sep 8, 2023


Solar panels have become a symbol for a more sustainable future. As the world takes significant strides towards environmental responsibility, the demand for solar energy solutions is soaring. In recent years, solar panels have witnessed a remarkable surge in popularity as the world continues to embrace sustainability and combat climate change. According to the International Energy Agency, solar power is among the fastest-growing sources of renewable energy, with an annual growth rate of around 17% in electricity generation. However, this surge in interest comes with its own set of challenges. Solar companies are constantly seeking innovative ways to run their businesses more efficiently, reduce costs, and increase profit margins.

For solar panel installers, one of the key challenges lies in the initial cost of obtaining and stocking solar panels. Many installers looking to secure the best prices may opt to pay for these panels upfront, resulting in a substantial cash flow gap between when they order the equipment and when they receive payment from their customers. It is here that an inventory finance solution comes into play, providing a lifeline to solar manufacturers, distributors and installers alike.

Manufacturers and distributors looking to move more solar panels and receive payments faster can also significantly benefit from partnering with an inventory finance provider. On the other side, installers can access extended payment terms that align better with their cash flow requirements, all while maintaining healthy inventory levels.

Understanding Inventory Finance

At its core, inventory finance is a collaborative program between solar panel manufacturers or distributors and an inventory finance provider, like DLL. This program enables dealers or installers to purchase solar panels without the need for immediate cash payment. Instead, installers are provided with a dedicated line of credit by the inventory finance provider, specifically designed for their solar panel purchases. Additionally, the manufacturer or distributor can offer extended payment terms, allowing installers more flexibility in repaying their outstanding balances, better synchronizing payments with their sales cycle.

How Does Inventory Finance Work?

When a manufacturer or distributor partners with an inventory finance provider, the installer places orders directly with the manufacturer, who then ships the solar panels directly to the installer. The inventory finance provider pays the manufacturer or distributor on behalf of the installer, often within as little as 24 hours of receiving the invoice. The inventory finance provider then invoices the installer, who repays according to the agreed-upon payment terms.

Benefits for Solar Panel Manufacturers and Distributors:

  • Reduced Days Sales Outstanding (DSO): Manufacturers and distributors must no longer wait indefinitely for payment; they can receive funds as early as 24 hours after an order is placed.
  • Enhanced Customer Loyalty: The availability of inventory finance options can strengthen relationships between manufacturers and installers, fostering loyalty.
  • Offloaded Administrative Burdens: By transferring billing and collection responsibilities, as well as repayment risk to the inventory finance provider, manufacturers and distributors gain the freedom to concentrate on other crucial aspects of their business, such as product development, marketing, or sales.

Benefits for Solar Panel Installers:

  • Extended Payment Terms: Installers can enjoy extended repayment periods, reducing the immediate financial strain and allowing for smoother cash flow management.
  • Preservation of Cash: Dedicated lines of credit mitigate the installer's reliance on cash and provide flexibility to collect payments before repaying outstanding invoices.
  • Increased Stocking Power: With access to a dedicated line of credit, installers can place larger orders, anticipate future growth, and offer a diverse range of products to their customers.

Choosing the Right Inventory Finance Provider:

When manufacturers, distributors and dealers are on the lookout for an inventory finance partner, they should consider the following:

  • Tailored Solutions: Seek providers that offer customized solutions aligned with specific needs, products, and business goals.
  • User-Friendly Digital Tools: Providers with accessible online portals provide transparency and robust reporting, offering users 24/7 access to vital credit information.
  • Long-Term Partnership: Look for partners who are invested in long-term success and equipped to navigate the ever-changing market landscape.

With a 50-year history, DLL is well-versed in the unique requirements of its partners worldwide, offering proven solutions that empower businesses to thrive. To learn more about inventory finance and how it can transform the solar industry, explore DLL's comprehensive offerings, and discover new horizons in sustainability, visit our Commercial Finance webpage.

International Energy Agency. (2022). Renewables 2021: Analysis and Forecast to 2026: Renewables 2021 – Analysis - IEA

Lindsey Lorenzen

Global Communications Business Partner

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