Inventory Financing Agreement Template for Switzerland

An inventory financing agreement is a crucial financial instrument that allows your business to unlock working capital by using inventory as collateral. Under Swiss law, this type of secured financing arrangement must comply with specific legal requirements outlined in the Swiss Code of Obligations and Civil Code to ensure enforceability and proper security interest creation.

When do you need this document?

You need an inventory financing agreement when your business requires immediate cash flow but has significant value tied up in stock or raw materials. This is particularly common for manufacturers, wholesalers, and retailers who experience seasonal fluctuations or need working capital to fulfill large orders. Swiss businesses often use this financing method to bridge the gap between purchasing inventory and receiving payment from customers, especially in industries like textiles, electronics, or food production where inventory turnover cycles can be lengthy.

Key legal considerations

The agreement must clearly establish the security interest over your inventory through proper pledge arrangements under Articles 884-918 of the Swiss Civil Code. Key provisions include borrowing base calculations that determine how much you can borrow against inventory value, advance rates that specify the percentage of inventory value available as credit, and detailed inventory monitoring requirements. The document should address inventory valuation methods, reporting obligations, and conditions that trigger additional collateral requirements. Insurance provisions are critical to protect both parties against inventory loss or damage, while default and enforcement clauses must comply with Swiss debt collection procedures under the SchKG.

Legal requirements in Switzerland

Swiss law requires inventory financing agreements to follow strict security interest creation procedures under the Civil Code. The pledge over inventory must be properly documented and may require possession or control arrangements depending on the inventory type and location. If your lender is a Swiss bank, additional regulations under the Federal Act on Banks and Savings Banks may apply. The agreement must specify jurisdiction for dispute resolution and enforcement procedures that comply with Swiss debt collection law. Proper notice provisions to guarantors and third parties are essential, particularly in syndicated facilities involving multiple lenders or security agents. Cross-default provisions must be carefully drafted to avoid conflicts with other financing arrangements, and the agreement should address treatment of proceeds from inventory sales to ensure continued security interest perfection.