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.
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
Fee for Terms
Not disclosed
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.
Pros
Compare multiple loans with one application
Options for borrowers with a range of credit scores
Loan specialists to guide you
Cons
Doesn't disclose rates and fees
Full list of lenders not available
Requirements to qualify vary by lender
Loan Amount
$100,000 to 20,000,000
Fee for Terms
Not disclosed
Loan Term
Not disclosed
Requirements
Minimum credit score of 580, minimum annual revenue of $120,000, preferably one to two years in business
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
APR
As low as 7%
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.
Pros
Rates start at 7%
Monthly rather than weekly LOC payments
High loan amounts
Cons
Must be a TD Bank business account holder
Requires autopay
Need good credit to qualify for the best rates
Loan amount
$25,000 to $500,000
APR
As low as 7%
Loan term
On demand
Requirements
A TD business checking account with at least a $40,000 minimum balance, payments must be auto-deducted from that account
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
Min. Credit Score
Not required
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.
Pros
No credit check required
Inventory financing up to $300,000
Low annual sales requirements
Cons
Doesn't disclose fees
Requires a minimum payment every 90 days
Must have a PayPal Premier or Business account
Loan amount
Up to $200,000 for first-time borrowers
Cost:
Not stated
Min. Credit Score
Not required
Loan Term
Not fixed — repayment tied to PayPal sales
Requirements
Use of PayPal for sales, history of at least $15,000 in annual PayPal sales
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
APR
0%
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.
Pros
Good for startups
No interest or fees
No minimum credit score
Cons
Low maximum loan amount
Funding could take up to 45 days
Requires contributions from your social network
Loan amount
$1,000 – $15,000
APR
0%
Loan term
6 months to 3 years
Requirements
Have at least ten friends and family members willing to contribute to your loan, live in the US, ages 18+, not in bankruptcy or foreclosure, not under any liens, not engaged in: multi-level marketing, direct sales, pure financial investing or illegal activities
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 – $250,000
APR
Average is 55.9% to 56.1%.
Min. Credit Score
625
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.
Pros
Accepts fair credit
Low revenue and time in business requirements
Funding as fast as 24 hours.
Cons
Average rates are high
May charge an origination fee
May require weekly repayments
Loan amount
$5,000 – $250,000
APR
Average is 55.9% to 56.1%.
Min. Credit Score
625
Loan term
3 to 24 months
Requirements
Companies in business at least 1 year, $100,000+ in gross annual revenue, majority owner with a 625+ personal credit score, active business checking account
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
APR
Fee based
Min. Credit Score
660
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.
Pros
Low monthly revenue requirement
Option to have supplier paid directly
Streamlined application process
Cons
Complicated fee structure
Rates as high as 27%
Requires 660+ credit score
Loan amount
$2,000 to $250,000
APR
Fee based
Min. Credit Score
660
Loan term
6, 12, 18 or 24 months
Requirements
1 year in business, valid business checking account
This information was collected independently by Finder.
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.
How does inventory financing work?
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:
Unsecured options. Some lenders offer financing without collateral, which can be useful for perishable goods. These include unsecured lines of credit, term loans, accounts receivable financing and merchant cash advances, though they typically cost more.
Existing inventory as collateral. Some lenders let you use the inventory you already own. The loan amount usually depends on the inventory’s appraised value, and a down payment of around 20% may be required.
Payment and fees. Lenders may pay your supplier directly, collect payments in installments or as a percentage of sales, and often charge a fixed fee rather than traditional interest, sometimes resulting in high APRs.
Use of funds. Funds can be used for any legitimate business purpose, including buying new inventory or covering cash flow gaps.
Note: If you only need to finance a specific customer order, purchase order financing may be a better fit.
Inventory financing example
Imagine you run an online store selling kitchen appliances.
Monthly sales: $15,000
Inventory funding needed: $9,500
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:
Some lenders will appraise your current inventory before approving the loan.
You may need to hire an appraiser to estimate how much the lender could recover if they had to sell it.
Inventory loses value over time, so lenders usually offer about 80% of its appraised value.
Example calculation:
Inventory appraised at: $12,000
Lender requires 20% down, so your loan amount is $9,600
Some lenders (mostly banks) may inspect your inventory periodically while you repay the loan. But online lenders are less likely to require inspections.
Pros and cons of inventory financing
Inventory financing has many benefits, but it comes with several drawbacks you should also consider before applying.
Pros
Collateral built into the loan. Secured loans are typically easier to qualify for and may help you get a lower rate, too.
Can send funds directly to suppliers. Some inventory financing providers will send the money directly to your supplier, which can speed up the process. They may even offer to continually finance your inventory if you regularly experience cash flow gaps.
Options for bad credit and startups. You may be able to qualify for certain types of inventory financing even if your credit isn’t great or you’re a newer business.
Many providers offer loyalty discounts. Repeat clients can often qualify for lower rates or more favorable loan terms.
Doesn’t rely as heavily on credit scores. This is more true if the loan is secured or you seek less traditional forms of funding, such as business cash advances or invoice factoring.
Cons
Potentially high rates. Financing your inventory could be pricey, especially if the funding is unsecured or you don’t have ideal credit.
Short terms. In general, most forms of inventory financing have relatively short loan terms, which can result in large repayments.
May require a down payment. In some cases, you may need to come up with 20% to put down on your loan.
May require an appraisal. If you’re using your existing inventory to secure a loan, the lender may require an appraisal to determine its liquidation value if you default.
Daily or weekly repayments are common. Oftentimes, the options suitable for inventory financing require weekly or even daily repayments, which can sometimes be a struggle.
Alternatives to traditional inventory financing
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.
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.
Term loans
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
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.
How inventory financing differs from accounts receivable financing
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.
How to qualify for inventory financing
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.
Fair credit score of 600+
Annual revenue of at least $100,000
At least six months in business
Work in an eligible industry
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.
How the economy may affect your chances of getting inventory financing
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.
Frequently asked questions
You typically can't qualify for inventory financing without a record of at least a few months of sales. If you need seed money to buy inventory, microloans might be your best option. Typically, microlenders offer up to $50,000 in financing and have programs designed to help startups get off the ground.
It can be. If you don't have the cash on hand to expand your inventory, it can be tough to grow your business. However, you'll need to make sure the financing fits into your budget so you don't over-extend yourself and have trouble repaying the loan.
Lacey Stark is a freelance personal finance writer for Finder, specializing
in banking, loans, investing, estate planning, and more. She has 20
years of experience writing and editing for magazines, newspapers, and
online publications. A word nerd from childhood, Lacey officially got her
start reporting on live sporting events and moved on to cover topics
such as construction, technology, and travel before finding her niche in
personal finance. Originally from New England, she received her
bachelor’s degree from the University of Denver and completed a
postgraduate journalism program at Metropolitan State University also
in Denver. She currently lives in Chicagoland with her dog Chunk and
likes to read and play golf.
See full bio
Biz2Credit connects you with lenders to get a loan to grow your business. Compare the loan types offered and see how they stack up to other business loans.
Advertiser disclosure
Finder.com is an independent comparison platform and information service that aims to provide you with the tools you need to make better decisions. While we are independent, the offers that appear on this site are from companies from which Finder receives compensation. We may receive compensation from our partners for placement of their products or services. We may also receive compensation if you click on certain links posted on our site. While compensation arrangements may affect the order, position or placement of product information, it doesn't influence our assessment of those products. Please don't interpret the order in which products appear on our Site as any endorsement or recommendation from us. Finder compares a wide range of products, providers and services but we don't provide information on all available products, providers or services. Please appreciate that there may be other options available to you than the products, providers or services covered by our service.
We update our data regularly, but information can change between updates. Confirm details with the provider you're interested in before making a decision.
How likely would you be to recommend Finder to a friend or colleague?
0
1
2
3
4
5
6
7
8
9
10
Very UnlikelyExtremely Likely
Required
Thank you for your feedback.
Our goal is to create the best possible product, and your thoughts, ideas and suggestions play a major role in helping us identify opportunities to improve.
