Inventory funding is a type of short-term loan or financing solution that allows businesses to purchase inventory without having to pay upfront from their working capital. For companies that rely heavily on stock or physical goods—such as manufacturers, wholesalers, retailers, or distributors—inventory funding can provide the necessary support to maintain operations, meet demand, and scale quickly.
Inventory funding typically involves a financial institution or lender offering a credit line or loan to help a business purchase inventory. The purchased inventory often serves as collateral for the loan. Once the inventory is sold, the business repays the lender, usually with interest.
This kind of financing is different from traditional loans. While traditional loans may be based on credit score or cash flow, inventory funding focuses on the value of the inventory itself. Lenders assess how easily the inventory can be sold, how much it is worth, and the company’s past sales performance.
