Strategies For Margining In-Transit Inventory

Introduction

In-transit inventory represents a significant, and growing, proportion of inventory for many borrowers, who often look to their lenders to advance against such inventory. ¹

As part of the lender's security package, the lender will have a security interest over the borrower's in-transit inventory. However, before the lender can consider including the inventory in the borrowing base, the lender needs to ensure that the borrower actually has title to the inventory. Further, unlike the typical situation where the inventory is located at the borrower's premises (where the lender will have access pursuant to the loan agreement/ security documents and/or a landlord waiver), the lender does not have any control over what the borrower's carriers will do with the inventory.