Quick answer
Stock funding pays for inventory before it is sold, so a business can order enough to meet demand without draining working capital. A short-term loan matched to how quickly the stock sells is common for seasonal or bulk orders, while a line of credit suits ongoing restocking. Unsecured options typically run from $5k to $500k. Size the order on realistic sell-through, not optimism.
Key points
- Match the funding term to how fast the stock sells.
- Base order size on realistic sell-through data.
- Slow-moving stock ties up cash and costs money to hold.
- Lines of credit suit regular restocking; loans suit big one-off buys.
- One-off or seasonal order
- Short-term loan
- Ongoing restocking
- Line of credit
- Typical amount
- $5k to $500k unsecured
- Key metric
- Stock days and sell-through
Stock is the lifeblood of retail, wholesale and online businesses, and also one of the biggest drains on cash. Every carton on the shelf is money that has left the account and will not come back until someone buys it. Order too little and you miss sales; order too much and cash sits idle for months. Funding stock well means buying the right amount, at the right time, on terms that match how quickly it sells.
Why stock squeezes cash
Most stock is paid for before it sells, sometimes months before for imported goods. If you hold six weeks of stock and customers pay on the spot, cash is tied up for about six weeks. If you sell to other businesses on 30-day terms, add another month. Growth makes it worse, because a bigger range or more customers means more stock on hand. That is why fast-growing product businesses so often run short of cash even when sales are booming. The working capital calculator shows how much cash your stock and debtor cycle locks up.
Match the funding to the stock
The most useful rule is to match the funding term to the stock’s sell-through. Seasonal stock for Christmas, back-to-school or summer suits a short-term loan repaid as the season’s sales come in, typically over a few months. A one-off bulk order or new range suits a short-term loan sized to the order and repaid over the expected sell-through period. Regular restocking throughout the year suits a line of credit, drawn for each order and repaid from sales, so you are not taking out loan after loan. See short-term business loans and business line of credit.
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Size the order on evidence
Optimism is expensive in inventory. Before ordering, look at last year’s sales for the same period by product, not just in total. Check current trends, such as which lines are accelerating and which are fading. Allow for supplier lead times and minimum order quantities, and keep a little in reserve for reorders rather than buying everything upfront. Where suppliers allow it, smaller, more frequent orders reduce how much cash is tied up at any moment, even if the unit price is slightly higher.
Watch for slow movers
Stock that does not sell costs money to hold: storage, insurance, the funding cost and the opportunity cost of cash that could be working elsewhere. Track how long each line sits on the shelf. Items that have not moved in several months are candidates for promotion, bundling or clearance. Turning them back into cash, even at a discount, often costs less than continuing to fund them. Our guide on stock and inventory cash flow explains how to measure stock days and act on them.
Bulk discounts: worth it?
Suppliers often offer better prices for larger orders or early payment. A discount is worth taking with borrowed money only if the saving is larger than the funding cost and the extra stock will sell within a sensible time. Our page on supplier bulk discounts walks through the maths.
What lenders look at for stock funding
Lenders want to see that the business sells its stock reliably and that sales flow through the account. Steady deposits, whether from card settlements, payment gateways or customer transfers, are the best evidence. They will also consider existing debts and how seasonal your sales are. A clear plan, such as “summer range, ordered in August, sold by February”, makes the assessment simpler and faster.
Online stores and marketplaces
Ecommerce businesses often hold stock in their own warehouse, with a third-party logistics provider or on a marketplace’s fulfilment network. Lenders assess them through bank statements that show payment gateway and marketplace settlements. Settlement delays from marketplaces can lengthen the cash cycle, so factor them into the term. See ecommerce and online stores.
Imported stock and longer lead times
Imported goods add complexity: deposits paid to overseas suppliers months before shipping, freight and customs costs on arrival, and the risk of delays that push stock past its selling season. If you import, build lead times and landed costs into your plan, and choose a term that covers the full journey from deposit to sale. A line of credit can be useful here because deposits and final payments happen at different times.
Stock as part of a wider plan
Stock funding works best when it sits inside a simple plan for the season: what you will buy, when it arrives, how you will market it and when you expect to have sold through. Write that plan down, even on one page, and check it against reality each fortnight. If a line is selling faster than expected, you can reorder early; if it is slow, you can promote it before it becomes dead stock. A lender will appreciate the plan, and so will your future self.
An illustrative example
An illustrative outdoor gear retailer needs to place its summer order in August, with goods arriving in October and selling mainly between November and January. The order is larger than the account can cover alongside winter running costs. A short-term loan drawn in August with repayments beginning as summer sales pick up, and finishing in February, funds the order without leaving the shop short for wages and rent through the quiet spring.
Stock up without the squeeze
If you need to buy stock before it sells, tell us what you are ordering, the total cost and when you expect it to sell. There is no credit check to enquire, we do not shop your file around to a stack of lenders, and a real person reads your enquiry. Accurate details help us match the term to your sell-through. Apply now.
Frequently asked questions
Can I get a loan to buy stock?
Yes. Stock is one of the most common uses of short-term business funding, especially before peak seasons or when suppliers offer bulk pricing.
How long should a stock loan be?
Roughly as long as it takes to sell the stock and collect the money. Seasonal stock that sells in ten weeks suits a short term; stock that turns slowly needs a longer one or a smaller order.
Is a line of credit better for inventory?
For businesses that restock regularly, often yes. You draw for each order and repay as sales come in, rather than taking a new loan each time.
How do I avoid over-ordering?
Use last year's sales by product, current trends and supplier lead times. Order in smaller batches where possible and track stock days to spot slow movers early.
Can ecommerce businesses fund stock?
Yes. Lenders assess online businesses through their bank statements, including payment gateway settlements, the same way they assess physical retailers.
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