Inventory Financing Options

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How It Works

The biggest problem for any business in commerce and wholesale is financing the inventory. For your business to be successful, it has to react to the changes in the marketplace. Acorn Finance provides access to personalized inventory financing loans through our simple and quick online application. Once you're qualified, you can select the best offer for you and finalize the inventory financing application with the lender.

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Our simple online application takes less than 15 minutes to complete and it won’t impact your credit score. 

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Inventory Financing Guide

Social media has led to an acceleration in the speed trends develop, and if you haven't got the cash to stock up on what's hot, you will often lose out. If you try to do this without external finance, you may find your working capital is restricted and day to day running of your business compromised. If you find yourself in this position or want to expand quickly, you should consider inventory financing.

What is inventory financing?

Generally, inventory financing is available either in the form of a business line of credit or, less commonly, a short-term loan. The important thing to understand is that in both cases, the inventory the business buys acts as collateral for the finance, freeing you of the need to provide collateral of your own.

How does inventory financing work?

Loan providers rarely, if ever, provide 100% of the cash you spend on inventory. As the products you buy are the guarantee on the loan, the lenders have to consider what the value would be if they had to seize the inventory and try to sell it themselves. (Should you default.) The liquidation value will be less than the market value, so the normal amount a lender will give you will be in the region of 50% to 80% of what you actually pay for the goods. What you are buying will affect this figure. Should you wish to purchase inventory that will subsequently have little value if liquidated, then a lender will offer you rather less than for goods that will have a high resale value. Indeed, you may discover that in that case, finance is hard to come by. Loan providers who offer inventory financing vary substantially. While there will be some who are only interested in bigger businesses, with minimum loans of $0.5 million or more, many others will cater to those with lower cash needs. When you start talking big numbers, it is likely that the application process and qualification levels will be rigorous. Lenders will forensically study your business right down to the last detail, including actual site visits. It won't be a simple form-filling procedure. Also, note that startups have a very difficult time trying to secure inventory financing. Though they may try angel investors, crowdfunding, and peer-to-peer lending, most loan providers will not look at any business with less than two to three years of trading behind them.

Who should be applying for inventory financing?

Inventory financing can be a help to any business that requires inventory. Whether you own a retail store, a wholesale business, or some kind of dealership, inventory financing can form a vital part of your commercial armory. It can give you the flexibility to react to changes in the marketplace, take advantage of discounts offered by suppliers and manufacturers, or simply cash in on sudden demands caused by weather, the holidays, social media, or the country's economy. It can be difficult or even impossible to adapt to rapid fluctuations in supply and demand if you are a small or medium business. If you qualify for inventory financing, you will find cash flow problems eased, and business opportunities increased.

What are the different types of inventory financing?

Inventory financing providers usually offer either lines of credit or short term loans. The only similarity is that in both cases, the inventory also becomes the collateral that guarantees the loan should the borrower get into financial difficulties. If you should default, the lender has the right to seize the inventory and sell it to limit its losses. Let's look at them in turn:

Line of credit

The business line of credit is the more popular option by far with both borrowers and lenders. It operates very similarly to a credit card. The lender gives you a limit, and you are free to borrow any sum as and when you like so long as you don't go over your limit. You make regular repayments, and as you pay the amount back, it becomes available to borrow again. Naturally, the provider charges interest, but you only pay the interest on the amount you actually borrow. For example, if your limit is set at $100,000, but you only borrow $30,000 for inventory, then the interest is based on that figure, not the $100,000.

Short-term loan

Some lenders offer a short-term loan for inventory financing. This is based very much on the traditional bank loan, but the repayments are usually over a short period, perhaps a maximum of 12 months. The lender agrees to provide a lump sum to buy inventory, which you repay regularly, plus interest, over a fixed term. While a short-term loan is perhaps the most recognized form of lending, the rolling line of credit is usually the preferred method. This is because it offers flexibility, you only have to negotiate once for what can be effectively multiple pots of money, and you can limit the interest you have to pay. Never forget that the inventory is the lender's guarantee and is liable to be taken away from you if you fail to make the correct payments on time.

How To Qualify For Inventory Financing

With the inventory acting as collateral, the qualification for inventory financing is often not as difficult as that for, say, a long-term bank loan or an SBA loan. The following is a list of things most finance companies will look for:
  • They will need to do a credit check, both for the business and the owner(s).
  • They will want to see your financial statements showing sales and revenue.
  • They will need an itemized list of the inventory you wish to purchase.
  • They will want an accurate business plan.
  • Your supply chain must be reliable.
Beyond these basics, there may be other checks and records the lender requires. As you might expect, the more money you are looking for, the greater the hoops you will have to climb through.

What are the pros and cons of inventory financing?

For you to be sure that inventory financing is something you and your business need, let's examine the pros and cons.


Inventory financing allows your business to enjoy flexibility in the way it approaches business opportunities. Having the financial freedom to buy the latest must-have product, buy in bulk, and anticipate trends changes the game entirely.
Inventory financing does this without damaging your cash flow. This means your business operates more smoothly and more profitably. No more worries about seasonality or the ups and downs of the trading year.
Not having to provide collateral makes inventory financing a safe option. Having your home and property on the line because it guarantees a loan is never a comfortable feeling. However sure of your business's money-making potential you are, things can happen that are beyond your control. With inventory financing, the worst that can happen is that you lose the inventory, not your house or car.


Sometimes organizing inventory financing is a long and drawn-out process. In retail and wholesale businesses, time is of the essence. That delay could cost you business and profits.
Depending on your situation, inventory financing may not be easy to get. Poor credit history or a blip in your financial health may mean you have to look elsewhere if you want extra cash.
Because of the short-term nature of inventory financing and the risk involved with trying to recover the loan by liquidation, some finance companies charge high rates of interest. This isn't always the case, but you need to be watchful.

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What lenders offer inventory financing?

There are many finance companies prepared to offer inventory financing. While traditional banks may be wary of being in this market, there are a large number of alternative lenders and online companies that specialize in inventory financing. The trick is to find the one that is the best fit for you and your business.

How to apply for inventory financing?

The application process for inventory financing depends very much on the individual lender and the sums involved. It may be a simple online form or they may need to come to your premises to see where you will keep the inventory. The best first step is to work with us to find the best offers for you and your business's circumstances. We'll assess your information, compare financing options, and present the best financing options to you.

Is inventory financing right for your business?

All loans cost money, so you need to look at the broad picture and closely examine what is available and what you can realistically sell. There are many lenders out there, and their products vary. Make sure you do your research and don't simply go with the first offer you see. Using a comparison service will save you a lot of time. Invoice financing is a good move for many businesses helping them even out cash flow and pounce on opportunities that arise. But you must realize that finding that perfect lender takes time and resources. Acorn Finance can make the entire process quick and easy, allowing you to use your time to do what you do best, running your business. Our application process takes just a few minutes and won't affect your credit rating. One of our experienced experts will phone you to discuss your application in-depth and answer any questions you may have. Choose from the options we will send you and finalize the deal. Simple.

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