Stock finance and inventory finance: who lends to buy stock?

Stock finance (also called inventory finance) is money borrowed to buy goods you intend to sell, repaid from the sales those goods produce. It sits under the broader heading of working capital, but it has its own logic: the loan exists only because cash leaves the business weeks or months before the stock turns back into cash. Choosing the right lender for stock is mostly about how long that round trip takes and who you are paying.

How does stock finance work in practice?

The lender pays for the goods, either directly to your supplier or into your account, and you repay as the stock sells. The structure varies by lender type:

• Supplier-paid facilities. A trade financier pays a local or overseas supplier on your behalf, then gives you an agreed period, often 90 to 180 days, to repay. You only draw against actual purchase orders.
• Short-term loans. A lump sum, repaid weekly, fortnightly or monthly over a few months, sized on your bank statements.
• Revolving facilities. A line of credit or overdraft you draw for each order and pay back down when sales land.
• Revenue-based advances. A provider advances a sum and collects a share of daily card or online takings until it is repaid.

What almost never happens is a lender taking the stock as its only security. Goods lose value fast when a lender has to sell them in a hurry, so stock finance leans on something else: your trading history, a director guarantee, your debtors, or property.

Which lenders fund stock and inventory?

Each part of the lending market approaches stock differently. This table matches the common needs to the lender types and loan types that usually fit.

Your situation	Lender type that usually fits	Loan type	What carries the deal
Importing, paying a supplier before goods land	Trade finance providers	Trade or supplier finance	Purchase orders, shipping documents, guarantee
Retailer topping up before a busy period	Online lenders	Short-term loan	Recent bank statements and turnover
Card-heavy shop or hospitality venue	Revenue-based providers	Merchant cash advance	Daily card takings
Established business, buying stock all year	Major or regional banks	Overdraft, trade line, line of credit	Financials, security, track record
Wholesaler selling on 30 to 60 day terms	Invoice finance providers	Invoice finance	Your trade customers’ invoices
Large one-off bulk buy or clearance deal	Caveat and second mortgage lenders	Property-secured short-term loan	Equity in residential or commercial property

Two lender types often work together. A wholesaler might use trade finance to pay the overseas factory, then invoice finance once the goods are sold to retailers on credit, so the cash cycle is covered from purchase order to customer payment.

Can you borrow against the stock itself?

Rarely by itself, and the reason is simple: in a forced sale, stock fetches a fraction of its cost. Fresh food spoils, fashion dates, electronics are superseded and specialised parts have few buyers. Lenders who do take stock as security usually want an established business with reliable stock records, regular stocktakes and goods that hold their value.

There is a second complication. Many suppliers sell on retention of title terms, meaning the goods stay theirs until paid for. AFSA notes that the Personal Property Securities Register is where business operators who sell on credit, consignment or retention of title can register their interest. A lender reviewing your file will search the register, so know which suppliers hold registrations and what is owing to each.

How much stock finance can you get?

It depends on the lender type and what supports the loan:

• Unsecured stock funding for trading businesses is typically in the range of $5,000 to $500,000, sized on turnover and bank statements.
• Property-secured loans run from $20,000 to $5,000,000 on first mortgages, second mortgages or caveats, which suits large bulk buys or several orders at once.
• Trade finance limits are usually set on your purchasing pattern and how quickly past orders have been repaid.

Lenders look closely at stock turn: how many times a year the stock sells through. A business that turns its stock every six weeks can comfortably carry a short facility; one that holds stock for nine months needs a longer, more conservative structure. Our borrowing power estimator helps you test what repayment your own surplus can carry.

If you already know the order you need to fund, check which lender type fits your stock cycle before you commit to the supplier.

An illustrative stock finance example

Consider this invented scenario (illustrative only, figures rounded). A homewares importer orders a container worth $120,000 ahead of the Christmas period. The supplier wants 30% deposit now and the balance before shipping. The importer pays the deposit from cash, and a trade financier pays the $84,000 balance directly to the supplier, with 150 days to repay. The goods land in October, sell through to retailers in November and December, and the facility is cleared in February from those sales. Because the importer only borrowed for the time the stock was actually in transit and on the shelf, the cost is limited to that period.

What do lenders check before funding stock?

Stock lenders want evidence that goods will sell and that the cash will come back. Expect to provide:

1. Recent bank statements, usually three to twelve months, showing sales landing and suppliers being paid.
2. BAS for the last few quarters, which confirm turnover.
3. Supplier invoices, pro formas or purchase orders for what you are buying.
4. A sales history or stock turn figure, ideally by product line.
5. An aged stock report if you hold significant inventory, showing what has been sitting longest.
6. Customer orders or contracts if the stock is already pre-sold.

For larger facilities, banks will add financial statements and sometimes a stocktake report.

Stock finance compared with other options

Option	Best when	Watch for
Supplier credit terms	Supplier will give 30 to 60 days	Terms tightening when you need them most
Trade finance	Paying suppliers before goods arrive	Only covers the purchase, not other costs
Short-term loan	One-off order, clear sell-through date	Repayments start before stock sells
Line of credit	Ordering repeatedly through the year	Limit set on your history, not one order
Property-secured loan	Very large or several orders at once	Valuation time, every owner’s consent

Before borrowing, ask the supplier first. Extended terms or a smaller deposit cost nothing and reduce how much you need. Our page on paying suppliers covers supplier-side options in more detail.

Which businesses lean on stock finance most?

Some trades carry stock as a matter of course, and lenders already understand their rhythm:

• Retail and online stores, which buy ahead of Christmas, EOFY sales and back-to-school.
• Importers and wholesalers, whose cash is tied up from the supplier deposit until the trade customer pays.
• Hardware, building supplies and auto parts, where a wide range has to sit on the shelf.
• Farm supply and seasonal produce businesses, which buy heavily before a short selling window.
• Hospitality venues, mostly for liquor and dry goods bought in bulk at a discount.

If your industry is on this list, tell the lender how your year normally runs. A lender who can see the pattern in your bank statements and BAS will size the facility around it rather than around one quiet month.

When is stock finance the wrong answer?

When stock is not moving. business.gov.au’s cash flow guidance suggests keeping stock levels from running too high and, where it suits, buying only when a customer has placed an order. If your aged stock report shows goods sitting for months, more finance just adds cost to inventory you cannot sell. Clear slow lines, tighten ordering and fix pricing first.

It is also the wrong tool for a business losing money on each sale. Stock finance solves a timing gap between paying and getting paid; it does not fix a margin problem. If your busy months are predictable, our seasonal cash flow page explains how to plan the whole year rather than one order at a time. You can also browse every purpose we cover from the funding-for hub.

Ready to fund your next order?

Tell us what you are buying, roughly when it will sell and how your sales come in, and a lending specialist will point you to the lender type that suits your stock cycle. Start a 60-second enquiry. Asking costs nothing and leaves no mark on your credit file, your details are not handed around to a crowd of lenders, and a real person reads your answers. The more accurate they are, the better the first match.