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Inventory financing gives your business the cash flow it needs to fill orders and grow. While traditional inventory financing works directly with your supplier, you can use almost any business loan or line of credit to cover the cost of new inventory. The best option for your business depends on factors like your industry and how often you’ll need financing.
9.5 Excellent
Lendzi is a business loans marketplace that allows you to compare multiple lenders and loan options with a single application. Plus, its highly rated team of loan specialists is standing by to help you choose the best inventory financing solution that works for your business. You won't find rates and fees disclosed on its website, but that's because the ranges vary depending on the lender and loan type.
| Loan Amount | $100,000 to 20,000,000 |
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| Fee for Terms | Not disclosed |
| Loan Amount | $100,000 to 20,000,000 |
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| Fee for Terms | Not disclosed |
6.7 Standard
A revolving line of credit (LOC) is a flexible form of funding that's ideal for inventory financing, and TD Bank offers credit lines up to $500,000. It also offers term loans up to $1 million. Plus, its rates start as low as 7% and it only requires monthly repayments — as opposed to weekly remittances — beating out much of the competition. But you'll need a TD business checking account that meets minimum balance requirements to qualify, and you must agree to have payments automatically deducted from your account.
| Loan amount | $25,000 to $500,000 |
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| APR | As low as 7% |
| Loan amount | $25,000 to $500,000 |
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| APR | As low as 7% |
Poor credit? No problem. PayPal Working Capital loans don't require a credit check and can provide funding to purchase inventory within minutes, if approved. You just need a PayPal Premier or Business account and $15,000 to $20,000 in annual PayPal sales to qualify for financing up to $200,000 — or $300,000 for repeat customers.
But it doesn't disclose its fees, and this type of financing is typically expensive. Plus, it's only available for businesses that take PayPal payments, repayments are deducted from each sale and there's a minimum payment due every 90 days.
| Loan amount | Up to $200,000 for first-time borrowers |
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| Min. Credit Score | Not required |
| Loan amount | Up to $200,000 for first-time borrowers |
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| Min. Credit Score | Not required |
7.4 Great
For startups that have trouble qualifying for more traditional inventory financing, Kiva crowdfunded loans could be the solution. There's no interest, fees, collateral or minimum credit score requirement, making it ideal for new businesses or owners with poor credit who need to purchase inventory. But loan amounts are capped at $15,000, you'll need friends and family to contribute and funding can take up to 45 days.
| Loan amount | $1,000 – $15,000 |
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| APR | 0% |
| Loan amount | $1,000 – $15,000 |
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| APR | 0% |
9.2 Excellent
OnDeck specializes in inventory financing and accepts credit scores as low as 625. It also has relatively low revenue and time-in-business requirements. It offers both business lines of credit and term loans — either one of which could be the right fit, depending on your inventory needs.
But APRs can be a little steep, with the average rate around 56%, and it may charge an origination fee. You may also have to make weekly repayments.
| Loan amount | $5,000 – $400,000 |
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| APR | Average is 56.4% to 56.6%. |
| Min. Credit Score | 625 |
| Loan amount | $5,000 – $400,000 |
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| APR | Average is 56.4% to 56.6%. |
| Min. Credit Score | 625 |
8 Great
American Express only requires an average of $3,000 in monthly revenue to qualify for its business line of credit, making it one of the lowest revenue requirements around. It offers inventory financing up to $250,000 and gives you the option to have the money sent directly to your supplier. It also has a streamlined, practically no-doc application process.
But its fee structure is a little complicated because each draw is treated as either an installment loan or a single payment loan, and that can make it difficult to compare with other lenders. It also requires a minimum 660 credit score, so it may not be accessible for some business owners.
| Loan amount | $2,000 to $250,000 |
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| APR | Fee based |
| Min. Credit Score | 660 |
| Loan amount | $2,000 to $250,000 |
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| APR | Fee based |
| Min. Credit Score | 660 |
Inventory financing is a type of loan businesses use to buy products to sell or materials to make their products. It’s most common for small or growing businesses that don’t qualify for traditional bank loans but need funds to meet demand, cover cash flow gaps or stock up for busy seasons.
While it can be more expensive than a regular bank loan, inventory financing usually has easier requirements for credit, revenue and time in business. Some lenders can even fund loans within 24 hours.
Inventory financing gives your business credit to purchase inventory. Often, the goods you buy act as collateral — if you fail to repay, the lender can seize that inventory.
Key points:
Note: If you only need to finance a specific customer order, purchase order financing may be a better fit.
Imagine you run an online store selling kitchen appliances.
If you’re using the loan to buy new inventory, lenders usually base your loan amount on the manufacturer’s price of the goods you’re purchasing.
If you’re using existing inventory as collateral:
Example calculation:
Some lenders (mostly banks) may inspect your inventory periodically while you repay the loan. But online lenders are less likely to require inspections.
Inventory financing has many benefits, but it comes with several drawbacks you should also consider before applying.
There are other ways to finance inventory without using your inventory as collateral. These include unsecured term loans, lines of credit and cash advances. However, some lenders may consider business assets like property or equipment as collateral instead of inventory.
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A line of credit allows your business to access cash continually to replenish your inventory as needed. You can typically use your inventory as collateral or apply for an unsecured credit line. But generally, you’ll have to pay the manufacturer yourself, so it requires more work than traditional inventory financing.
Lines of credit tend to be less expensive than inventory financing because they usually come with interest instead of a fixed fee. But credit lines of online lenders are often more expensive, with rates reaching up to 80% APR or more in some cases.
A term loan offers a one-time lump sum of financing, which you repay plus interest. It’s a good choice for businesses that don’t regularly need inventory financing. Like a line of credit, you can use the inventory as collateral or apply for an unsecured term loan. And also, like a line of credit, you’ll have to pay your suppliers yourself, so it may take a little more time to receive your inventory.
Merchant cash advances give an advance on future sales for businesses that serve customers, like retailers. You can usually get a percentage of your average monthly sales up front, which you repay with a percentage of your daily sales — plus a fixed fee. These typically don’t come with strict credit or time-in-business requirements.
But merchant cash advances are one of the most expensive types of business financing. APRs regularly reach 300%, and the daily payment schedule can be rigorous. You may want to save this option as a last resort.
Accounts receivable financing includes invoice factoring and invoice financing. Factoring means selling unpaid invoices at a discount, while invoice financing lets you keep control of them. It’s best for businesses selling to other businesses or government agencies.
You can usually get 85–90% of your invoice value up front, with the remainder (minus fees) paid once clients settle their bills. Invoice financing works similarly, with repayment as customers pay.
Eligibility doesn’t depend on credit history, making it a good choice for startups or owners with bad credit, though APRs are higher than typical term loans or lines of credit.
Inventory financing funds future inventory purchases, while accounts receivable financing advances cash for work you’ve already completed. AR financing can cover any business expense, including inventory, but inventory financing is only for buying inventory.
The structures differ. Inventory financing is a loan backed by your inventory, repaid in installments. Accounts receivable financing usually means selling unpaid invoices to a factoring company, which collects from your clients or requires repayment as invoices are paid.
Both options are high-risk and can be expensive, but the risks vary: inventory can lose value over time, while clients might not pay invoices. Inventory financing works for retailers and wholesalers. Accounts receivable financing is typically limited to wholesalers.
Each lender has different requirements, and it also depends on the type of funding, but generally, you must meet the following criteria to qualify for an inventory financing loan.
While it’s possible to use a bank loan to finance inventory, banks are typically harder to qualify with than online providers. You can often check if your business qualifies by filling out a preapplication form on the lender’s website or by calling the lender directly.
Whether you sell household goods or fashion accessories, lenders assess the value of your inventory when making a financing decision. They look at factors like resale value, depreciation and likelihood of theft, as well as the state of the overall economy, to determine eligibility.
When the economy is in a recession, products that aren’t staples may not sell, making inventory financing risky for lenders. If your business sells products that the average consumer isn’t likely to buy when their budgets shrink, like they did during the global financial crisis of 2008, you may have difficulty securing inventory financing, if at all.
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Find financing to grow your business — or even buy another.
Stay away from big banks for a loan of this size.