26 March 2025
What Lenders Ask About Inventory Balances
Common questions from Taiwan banks reviewing inventory-backed facilities.
When inventory secures a credit line, lenders look beyond the balance sheet total. They want to know how the figure was built: count frequency, valuation method, and how obsolete stock is identified.
Expect questions on consignment arrangements, goods in transit, and whether related-party purchases inflate unit costs. Clear schedules answer these faster than narrative assurances.
An independent stock count observation or full inventory valuation audit can satisfy covenant language that calls for periodic verification. Align the engagement timing with your reporting calendar so the letter arrives before the bank’s review window.
Keep a standing packet: latest aging, count instructions, prior observation letters, and costing policy summary. Updating that packet each quarter reduces last-minute scrambling when the relationship manager asks for evidence.