Inventory Financing

Get inventory financing to keep the shelves stocked and customers happy.


Overview of Inventory Financing

In order to have a successful business, you must have sufficient inventory on hand to satisfy customer demand. Inventory can turnover quickly and sometimes unpredictably, so it helps to have a supply of financing to purchase inventory when needed. There are a number of ways to get inventory financing that FitBiz Loans can help you with.

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free-guideFree Guide To
Small Business Financing

How Inventory Financing Works

There are a variety of inventory financing options to help small businesses acquire inventory. The best one for you depends on a combination of factors:

The type of inventory you deal in

The amount of inventory you have on hand

Your credit score (check your score here for free)

Your business’ cash flow

Vendor financing

The best place for most small businesses to start when they need inventory financing is usually the vendor. The vendor that you are purchasing the inventory from may offer terms that allow you to pay in installments or defer payments for 30-90 days. Before offering you such terms, the vendor will most likely check your business credit history. If your business has paid its bills on time in the past, vendors will be more likely to extend you credit.

Traditional bank financing

After vendor financing, the most economical way to get inventory financing is through a bank. Since the funds are being used to purchase inventory, the bank will shorten the term of the loan (tied to how quickly your inventory turns over) or issue a line of credit that you can draw on as needed to buy inventory. Bank financing is typically secured by existing inventory, as well as by a blanket lien on other business assets. In order to qualify for bank financing, you must have a great credit score and a history of good business revenues.

Asset-based line of credit

If your credit score and cash flow aren’t great, but you have a lot of inventory and receivables on hand, consider an asset-based line of credit. Asset-based financing is backed by receivables and existing inventory. Your chances of approval depend on the value of your existing inventory and its liquidation potential (i.e. if you couldn’t pay back what you borrowed, and the lender had to sell your inventory, how much money would it go for?) Asset-based financing is more expensive than bank financing but is a good option for borrowers with lower credit scores or young businesses that are just building up sales and cash flow.

Online loans

Last but not least, you can get an online loan or line of credit to purchase inventory. Online financing is a great option if you need money quickly or have a startup. It’s possible to get a line of credit of up to $500K in as little as 1 week. Some online loans even offer interest-only payments for the first several weeks, so you don’t have to worry about making higher loan payments until the inventory sells.

How FitBiz Loans can help
FitBiz Loans financing specialists can help you discover all your options for inventory financing. We will help you understand what is the best type of inventory financing for your business goals and financial situation. Click here for a free personalized consultation!

Will I Qualify for Inventory Financing?

Qualification requirements for inventory financing vary depending on which option you choose from those outlined above.

In virtually all cases (with the exception of maybe vendor financing), you need to have inventory with a good liquidation potential. In other words, if you can’t pay back the loan, and the lender has to sell your inventory, they want to ensure that it has a reasonable sales value. If your inventory is something perishable, like cosmetics or food, or has a low liquidation value, such as toys or books, it will be difficult to get inventory financing.

Here’s a rundown of other basic approval requirements based on type of inventory financing:

Vendor financing - Vendor must offer credit; good business credit score; good relationship with vendor

checkboxBank financing - Credit score above 650; history of solid business revenues

Asset-based financing - High level of inventory and receivables on hand; good inventory management system

Online financing - Social security number and US bank account

The amount of financing you can qualify for is typically tied to the inventory’s liquidation value. For example, most lenders will provide somewhere between 50-60 % of the inventory’s liquidation value in financing and less than that for certain special kinds of inventory (e.g. unfinished parts or components). 

Cost of Inventory Financing

Cost varies based on the type of inventory financing. Here’s the approximate range of interest rates:

Vendor financing: Usually offered free of charge

Bank financing: 4-6 %

Asset-based financing: 10-18 %

Online financing: 18-30 %

The Details:

Maximum Loan Amount

Typical Loan Term

Typical Interest Rates
4-30 %

1 week - 1 month

Down Payment?

Varies. Existing inventory or receivables may serve as collateral.

Personal Guarantee?

Have a question?


small business loansThere are a variety of financing options to fund inventory purchases, including several low-interest rate options.

small business loans

Can get inventory financing quickly, usually in less than 1 month.

small business loansExisting inventory and/or receivables can be used as collateral.

small business loansInventory line of credit can grow larger as your business grows.


Inventory financing must be used carefully so that you don’t end up with a surplus of inventory or wasted inventory.

Need a reliable inventory management system to qualify for financing.

Can be difficult or impossible to get financing for certain low-value inventory, such as toys or books.


How to Apply

Answer Simple Questions

Browse Your Loan Options


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Additional Resources

Inventory Management: The Small Business Owner’s Guide

How to Reduce Inventory Theft in Your Business

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