How much do you need?
We’ll start with a brief questionnaire to better understand the unique needs of your business.
Once we uncover your personalized matches, our team will consult you on the process moving forward.
Here are 5 inventory financing loans
| Lender | NerdWallet Rating▼ | Max loan amount▼ | Min. credit score▼ | Next steps |
|---|---|---|---|---|
SBA 7(a) loan with Fundera by NerdWallet | Best for SBA inventory financing | $5,000,000 | 650 | with Fundera by NerdWallet |
Bluevine - Line of credit with Fundera by NerdWallet | 5.0/5 Best for Inventory lines of credit | $250,000 | 625 | with Fundera by NerdWallet |
OnDeck - Line of credit with Fundera by NerdWallet | 5.0/5 Best for Inventory lines of credit | $100,000 | 625 | with Fundera by NerdWallet |
Fora Financial - Online term loan with Fundera by NerdWallet | 4.5/5 Best for Inventory loans for borrowers with bad credit | $1,500,000 | 500 | with Fundera by NerdWallet |
Fundbox - Line of credit | 5.0/5 Best for Startup inventory financing | $150,000 | 600 | Read Review |
Here are 5 inventory financing loans
Best for SBA inventory financing
Best for Inventory lines of credit
Best for Inventory loans for borrowers with bad credit
Best for Startup inventory financing
I'M INTERESTED IN:
Our pick for
SBA inventory financing
SBA 7(a) loans are issued by banks and credit unions and secured by the U.S. Small Business Administration. These loans have long terms and low interest rates but require strong credentials to qualify.
SBA 7(a) loan
Max Loan Amount
$5,000,000
Min. credit score
650
Est. APR
11.50-15.00%
7(a) loans are issued by private lenders and backed by the SBA. They offer long repayment terms and low interest rates.
Lowest interest rate
Max loan
$5,000,000
Min. Credit score
650
Apr range
11.50-15.00%
Our picks for
Inventory lines of credit
These online lenders offer fast lines of credit and repayment terms up to 12 months. You may be able to qualify with a credit score of 625 or higher.
Bluevine - Line of credit
Max Loan Amount
$250,000
Min. credit score
625
Est. APR
20.00-50.00%
Bluevine's line of credit provides fast working capital for short-term borrowing needs.
May fund quickly
Max loan
$250,000
Min. Credit score
625
Apr range
20.00-50.00%
OnDeck - Line of credit
Max Loan Amount
$100,000
Min. credit score
625
Est. APR
39.90-77.90%
OnDeck offers a fast line of credit for small-business owners with less-than-stellar credit who need to manage cash flow or buy inventory.
May fund quickly
Max loan
$100,000
Min. Credit score
625
Apr range
39.90-77.90%
Our pick for
Inventory loans for borrowers with bad credit
Fora Financial offers inventory loans that can be used for a variety of purposes. You may be able to qualify with a credit score of 500 or higher.
Fora Financial - Online term loan
Max Loan Amount
$1,500,000
Min. credit score
500
Fora Financial can be a good fit for borrowers who may fall short of qualifying for traditional bank financing or young but established small businesses looking for speedy financing.
Max loan
$1,500,000
Min. Credit score
500
Our pick for
Startup inventory financing
Fundbox provides short-term lines of credit with funding as fast as the next business day. You need only six or more months in business to qualify.
Fundbox - Line of credit
Max Loan Amount
$150,000
Min. credit score
600
Est. APR
36.00-99.00%
Fundbox offers a business line of credit to fill a cash flow gap, and qualifying is easier than with other lenders.
May fund quickly
Max loan
$150,000
Min. Credit score
600
Apr range
36.00-99.00%
What is inventory financing?
Inventory financing is a type of business financing with the purpose of helping your business purchase products to sell. The products you buy serve as collateral on the financing, so you don’t always have to put up personal or other business assets to secure the loan. Inventory loans function similarly to regular small-business term loans or lines of credit.
How does inventory financing work?
Inventory financing is a line of credit or term loan that is based on the value of the inventory you want to buy. Although you may ask for a loan amount equal to the total cost of the inventory you’d like to purchase, many lenders will offer you only a percentage of the inventory’s value.
This could be as little as 20% or as much as 80% depending on the type of inventory and the lender.
Because the value of inventory depreciates, offering only a percentage of the loan amount asked for mitigates risk for the lender if you default on the loan and they need to sell off your inventory to recover their losses.
Inventory financing can be a good funding option for businesses in the retail, wholesale and manufacturing industries. It can help you:
- Purchase inventory to prepare for your busy season.
- Cover short-term cash flow gaps.
- Buy additional stock to meet increased customer demand.
- Update product offerings or launch products.
- Purchase products in bulk at a discount.
Types of inventory financing
Lenders offer two types of inventory financing — inventory loans and inventory lines of credit. The right option will vary based on your business’s needs.
Inventory loans
Inventory loans are structured like traditional term loans, in which you receive a specific amount of capital and pay it back, with interest, over a period of time. Term loans may have higher borrowing amounts and longer repayment periods, making them a better choice for financing large, one-time inventory purchases.
Inventory lines of credit
Inventory lines of credit give you access to a set amount of money that you can tap into as needed — and you pay back only what you’ve borrowed. These credit lines are often revolving, meaning once you’ve paid back what you’ve borrowed, you again have access to the maximum approved amount and don’t need to continuously reapply for funding.
Lines of credit offer more flexibility than term loans and work best for financing ongoing inventory purchases.
Pros and cons of inventory financing
Pros
- Self-collateralizing. You may not need to rely as much on personal credit, time in business or other forms of collateral to qualify for financing.
- Good for sales. Inventory financing can be used to meet increased customer demand, prepare for a busy season or upgrade a product line.
- Easy application process. If your inventory records are organized, it can be quick and easy to apply for this type of financing, especially when working with an online lender.
Cons
- Limited loan amounts. Lenders will typically offer only a percentage of the total cost of the inventory you’re looking to purchase.
- Expensive. Business loan rates can be high on this type of financing, especially if you have a lower credit score, have less time in business or aren’t using other assets to secure the loan. Although your business still may be able to qualify, the cost of borrowing will be much higher.
How to get inventory financing
You can get inventory financing from banks, credit unions and online lenders.
Although banks and credit unions usually offer the most affordable funding, they are less likely to offer inventory financing (compared with other loan types) because of the riskiness of inventory loans. Many traditional financial institutions do, however, offer SBA loans, which can be used as a form of inventory financing.
Online lenders, on the other hand, can offer flexible loan qualifications, fast funding and simple applications. These loans may be more expensive than bank or SBA loans.
Before you choose an inventory financing lender, you’ll want to research and compare several options to determine the best fit for your business. You’ll want to consider factors such as borrowing costs, repayment terms, funding speed, customer support and lender reputation.
Once you’ve found the right lender, you can start the application process. You’ll typically need to provide the following documents:
- Business and personal bank statements.
- Business and personal tax returns.
- Business financial statements (e.g., profit and loss statement, balance sheet).
Lenders will likely require inventory-specific information as well. They may ask about your inventory turnover, sales projections and inventory management system.
Alternatives to inventory financing
If you’re having trouble finding or qualifying for inventory financing, there are other options to consider:
- Invoice financing or factoring: Both invoice financing and invoice factoring can help cover gaps in cash flow by advancing money on your unpaid customer invoices. With invoice financing, your unpaid invoices serve as collateral on a loan until your customer pays you. With factoring, a company purchases your unpaid invoices at a discount, and takes over collecting the money from your customers.
- Business credit card: Similar to a line of credit, a business credit card is a revolving line that only charges interest on money you have spent on the card. As you pay down the card, you can spend money on it again.
- Purchase order (PO) financing: Similar to inventory financing, purchase order financing is a lump sum of money that can be used to cover cash flow gaps. While inventory financing can be used for general inventory needs, however, PO financing is tied to the needs of a specific purchase order.
Find the right business loan
The best business loan is generally the one with the lowest rates and most ideal terms. But other factors — like time to fund and your business’s qualifications — can help determine which option you should choose. NerdWallet recommends comparing small-business loans to find the right fit for your business.
Last updated on September 26, 2023
Methodology
NerdWallet reviewed both traditional and online lenders in order to create our list of the best inventory financing loans.
Our list includes a variety of loan options to meet the diverse funding needs of small-business owners, with an emphasis on lenders that offer a streamlined underwriting and approval process.
Each inventory financing option on our list meets the following criteria:
- Maximum loan amount of at least $100,000.
- Transparent rates and repayment terms.
- Personal credit score requirements of 650 or below.
- No more than two years in business required.
Wondering if you qualify?
It’s possible to get a business loan even if you have bad credit. Bad-credit business loans are available from alternative sources, like online or nonprofit lenders.
Learn more