Excess Inventory

Last Updated: Jun 7, 2019

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Excess inventory, sometimes also know as slow moving inventory or obsolete inventory, is unsold product that: 1. exceeds the projected consumer demand (usually determined based on the prior 12 months actual usage or projected usage over the subsequent 12 months period); 2. has not been sold in 12 months; 3. Inventory relating to cancelled products or product lines; 4. Is customer specific for a former customer.

Regarded as bad for business, negatively impacting inventory turnover and the costs associated with managing it. The typical time frame used for determining excess inventory is 12 months, although this can be altered depending on the specific inventory or industry involved. From a lender's perspective it is felt that if a borrower is unable to sell inventory within 12 months, it is unlikely, at best, that the lender could if it were liquidating the collateral.