Stock finance can mean borrowing to buy inventory, funding a confirmed order or using eligible stock as security for an asset-based facility. Those are different arrangements. Start with what you are buying, when you expect to sell it and when the resulting cash will actually reach your account. Any finance will depend on the provider's checks and terms.
Where does the cash get tied up?
Stock uses cash before it produces cash. You may pay a deposit or settle the supplier in full, wait for delivery, hold the goods, make the sale and then wait again for the customer to pay. A profitable order can still put pressure on working capital if that cycle is long.
Map the dates and amounts from supplier payment to customer receipt. If the shortfall is part of a wider timing problem, use the cash-flow gap guide as well.
Compare ways to fund stock
These are broad finance categories. They do not mean every route is available through Mills Commercial Finance or suitable for your company.
| Route | What it may fund | What it is linked to | Main point to investigate |
|---|---|---|---|
| Working-capital or term loan | A planned stock purchase or a broader cash requirement | Your company's ability to repay under the agreed terms | Whether fixed repayments fit the full stock-to-cash cycle |
| Overdraft or revolving facility | Stock needs that rise and fall within an agreed limit | The facility limit, use and review terms | Renewal, withdrawal, pricing and the time taken to reduce the balance |
| Purchase-order finance | Supplier costs for a qualifying confirmed customer order | The order, supplier, customer and expected margin | Whether the order and trading chain meet the provider's criteria |
| Trade finance | Specific goods and trade transactions, often across borders | Transaction documents, shipment and payment arrangements | Fees, currency or country risk, documentation and timing |
| Asset-based or inventory finance | Working capital supported by eligible stock your company holds | The stock's quality, value, saleability and reporting | Eligibility, valuation, monitoring and what happens if values fall |
Invoice finance starts after a sale
Invoice finance is generally linked to eligible business-to-business receivables. It may help after you have sold the goods and raised an eligible invoice, but it is not direct finance for unsold stock. If you need money before the sale, the order, trade, loan or inventory routes above may be more relevant to investigate.
Test the stock risk before you borrow
- Is demand evidenced by confirmed orders, repeat sales or a realistic forecast?
- How long will the stock take to arrive, sell and turn into cleared cash?
- What margin remains after freight, duty, storage, finance costs and returns?
- Can the goods perish, become obsolete, go out of season or fall in value?
- Are you relying on one supplier, one customer or one sales channel?
- Could you still make the repayments if sales were slower than expected?
A simple stock-cycle example
What might a provider ask for?
Requirements vary. You may be asked for accounts or management figures, bank statements, current stock reports, supplier terms, customer orders, sales history, margins and details of existing security. For transaction-based finance, contracts, purchase orders, shipping documents or insurance may also be relevant. Providing them does not mean finance will be approved.
Frequently asked questions
What is stock or inventory finance?
It is a broad description for finance connected to buying, holding or selling stock. The structure could be a loan, revolving facility, order or trade facility, or asset-based lending against eligible inventory.
Will the stock be used as security?
It depends on the structure. Some facilities assess your company's wider ability to repay, while inventory or asset-based facilities may use eligible stock as security. Ask how it is valued, monitored and treated if its value falls.
Can invoice finance pay for stock?
Invoice finance is normally linked to eligible receivables after a sale, rather than unsold stock. It may support the later part of your cash cycle, but it is not the same as stock, purchase-order or trade finance.