The problem it solves
Importers and distributors pay suppliers long before customers pay them. The gap between paying for goods and collecting on the resulting invoice is often ninety to one hundred and fifty days, and it grows with every increase in sales.
Inventory finance funds the middle of that cycle, the period when cash sits in a warehouse rather than in the bank or the sales ledger.
What lenders will fund
Finished goods with a clear resale market, standard specifications and stable values attract the best terms. Advance rates commonly run between thirty and sixty per cent of cost, occasionally higher where the goods are commodity grade and independently valued.
Work in progress, perishable stock, bespoke items and slow moving lines are usually excluded or heavily discounted.
Monitoring and control
Expect periodic stock reporting, independent valuations and in many cases inspection or third party warehousing. Facilities against goods held at a controlled location price better than those against stock spread across your own sites.
Good stock records are not an administrative detail here. They are the collateral evidence the facility rests on.
Cost and structure
Pricing typically sits above receivables finance because the security is less liquid, often several points over a reference rate plus arrangement and monitoring fees.
Most businesses use inventory finance as one layer of a combined structure: a trade line to pay suppliers, an inventory line while goods are held, and receivables finance once invoices are raised. Funded together, the whole cycle is covered without cash ever leaving the business permanently.
Frequently asked questions
Can I use inventory finance alongside invoice finance?
Yes, and it is the usual structure. The two facilities need to be documented so the security over stock and over the resulting receivable does not conflict, which is straightforward when arranged together.
What advance rate is realistic?
Thirty to sixty per cent of cost for most finished goods, higher for commodity grade stock with independent valuation and controlled storage.
Is a personal guarantee required?
Frequently on smaller facilities. On larger structured lines the security package over stock and receivables often carries the risk instead.
Last reviewed: 2026-08-20