Compare inventory financing options

Relying on your cash flow to obtain products from suppliers can cause financial strain if you have a growing business that relies on lots of inventory to keep going. This is where inventory financing comes in.

It’s designed to pay your supplier directly on your behalf, allowing you to meet your financial obligations while keeping your shelves stocked and your business’s reputation intact.

How does inventory financing work?

Inventory financing is a line of credit or short-term loan that a business can use to buy the products it sells. Any inventory you purchase becomes collateral for the loan, protecting the lender against default. If you’re not able to repay the loan, the lender can seize and sell the products to satisfy the debt.

Here’s a breakdown of how it works:

1. The lender pays your supplier.
2. The supplier ships the goods and you restock your inventory.
3. You sell your goods and repay the lender.

Depending on the lender, you can apply for up to $1 million. The repayment period is determined by how long it would take to sell your inventory.

A shorter repayment term may mean a higher interest rate, but it’s usually a small increase. It could make financial sense to choose the shortest term you could afford because paying interest on a small loan over a longer period will eat away at your cash flow.

Compare lenders that offer inventory financing

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Name	Product	Filter Values	Loan amount	APR	Requirements
First Down Funding business loans			$5,000 – $300,000	Fee Based	At least 1 year in business, an annual revenue of $100,000+, and a minimum credit score of 400	Alternative financing up to $300K with highly competitive rates.	Check eligibility More Info		loading Fetching your data...
Lendio business loans			$500 – $5,000,000	Starting at 6%	Operate business in US or Canada, have a business bank account, 560+ personal credit score	Submit one simple application to potentially get offers from a network of over 300 legit business lenders.	Check eligibility More Info		loading Fetching your data...
ROK Financial business loans			$10,000 – $5,000,000	Varies	Eligibility criteria 3+ months in business, $15,000+ in monthly gross sales or $180,000+ in annual sales	A connection service for all types of businesses — even startups.	Check eligibility More Info		loading Fetching your data...
OnDeck small business loans			$5,000 – $250,000	As low as 9.99%	600+ personal credit score, 1 year in business, $100,000+ annual revenue	A leading online business lender offering flexible financing at competitive fixed rates.	Check eligibility More Info		loading Fetching your data...
Rapid Finance small business loans			$5,000 – $1,000,000	Fee based	Steady flow of credit card sales, bad credit OK	Check eligibility More Info		loading Fetching your data...
Fundbox business loans			$1,000 – $100,000	4.99	You must have an established business.	Get flat rate, short-term financing based on the financial health of your business, not your credit score.	Check eligibility More Info		loading Fetching your data...
Kickpay e-commerce business loans			$20,000 – $1,000,000	Not applicable	At least $250,000 in the past 12 months of revenue, e-commerce business, use a 3rd party fulfillment center for storing and shipping inventory, at least one US location.	Get a loan for your e-commerce business based on your sales history.	Check eligibility More Info		loading Fetching your data...
Fundera business loans			$2,500 – $5,000,000	7% to 30%	$300,000+ of annual revenue, 680+ personal credit score, in business for 3+ years	Get connected with short-term funding, SBA loans, lines of credit and more.	Check eligibility More Info		loading Fetching your data...
LendingClub business loans			$5,000 – $500,000	12.15% to 29.97%	12+ months in business, $50,000+ in annual sales, no bankruptcies or tax liens, at least 20% ownership of the business, fair personal credit score or better	With loan terms that vary from 12 to 60 months, enjoy fixed monthly payments and no prepayment penalties through this award-winning lender.	Check eligibility More Info		loading Fetching your data...
Monevo business loans			$500 – $100,000	3.99% to 35.99%	Credit score of 500+, legal US resident and ages 18+.	Use this connection service to get paired with a loan you can use for business.	Check eligibility More Info		loading Fetching your data...

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How to qualify for inventory financing

Lenders want to see that you’re able to make repayments, so you need to prove that your business is in decent shape financially. While you don’t have to put up collateral if applying for an unsecured inventory loan, your business must meet some standard eligibility requirements:

• Minimum time in the industry. Lenders like to see that your business has been operating for at least a few years.
• Minimum annual revenue. You must show your annual earnings. Minimum revenue requirements differ by lender, but are typically at least $100,000 a year.
• No credit defaults. Defaulting on existing financial commitments shows lenders that your business is not in a position to take on another loan.
• Industry type. Whether or not a lender will approve a loan depends on your industry. If your business is in an industry considered to be volatile or unpredictable, your application might be rejected.

What are the benefits of inventory financing?

Inventory financing comes with several perks, including:

• Expedites shipping for overseas suppliers. Shipping inventory from overseas can mean significant delays, especially if you have to put off paying your supplier. An unsecured inventory loan can expedite shipping, helping to eliminate unnecessary delays. You may also want to consider trade finance for international business transactions.
• Avoid using working capital. You don’t have to dig into your working capital to unlock cash flow.
• Enhances your business’s reputation. This solution can also help boost your business reputation because you’re able to take on bigger orders, which will increase your business capacity and maximize turnover.

What should I keep in mind before applying?

There are a few questions you can ask yourself before applying to ensure it’s the right decision:

• What is the nature of your inventory? Slow-selling inventory may not be ideal for this type of financing, as you may not find a lender who’ll approve you.
• What is your credit like? You will generally need good credit to be eligible for inventory financing.
• Are you confident in your inventory? Remember the lender has the right to inspect the inventory to ensure it’s maintained its value.

Bottom line

Inventory financing can be a useful option to keep your business moving if your cash flow relies on maintaining lots of inventory at once. Make sure you compare your loan options before selecting a lender to ensure you get the right terms for your business’s needs.

Frequently asked questions

• What happens if my inventory depreciates in value?

  If your inventory is no longer worth the amount you borrowed, it may mean your business takes a loss. Unfortunately, this is part of the risk of inventory financing — and one of the reasons this short-term option can be more expensive than a traditional term loan.

• Will I need a business plan to qualify?

  Yes. As with any financing option, you’ll need a business plan that outlines how you plan on using your loan funds and how you plan to repay them, including future projections based on past sales.

• Do lenders require frequent inspections of my inventory?

  It depends on the lender. When you apply, be sure to ask how often inspections will occur, if the lender plans on using a third-party inspector and what will be inspected. Your lender will likely want to review the inventory itself along with your facilities and accounting systems.