Inventory financing unlocks cash tied up in stock — bulk purchase discounts, seasonal builds, and supplier prepayments — without selling equity or waiting on a bank line that moves at quarter-end.
Typical facilities run $250,000–$15 million for one to twelve months, secured by inventory and often accounts receivable in the same borrowing base. Repayment tracks sell-through: weekly or bi-weekly as SKUs move.
Jaken Finance Group arranges inventory-backed working capital for U.S. operating companies. We originate hard money, bridge, and DSCR on investment property separately.
Request inventory financing terms →
In the form notes: TTM revenue, inventory value, supplier deadline, and expected turnover in days.
Inventory financing vs PO financing vs unsecured
| Question | Inventory financing | PO financing | Unsecured term loan |
|---|---|---|---|
| What triggers the need? | Stock build, seasonal buy, warehouse fill | One confirmed customer order | Mixed business cash, no asset pledged |
| Collateral | Inventory (+ often AR) | The PO and shipment | None |
| Typical size | $250K–$15M | $250K–$15M | $50K–$500K |
| Typical term | 1–12 months | 1–12 months | 3, 5, or 7 years |
| Repayment | As inventory sells | When customer pays the PO | Fixed monthly installment |
If you only need $400,000 with no collateral and can carry a five-year payment, the unsecured path may be simpler. If you need $1.2 million in ten days against a vendor prepay, inventory or PO financing fits the clock.
When inventory financing creates upside
- Capture supplier discounts — A 10–15% prepay discount on a six-figure buy often exceeds the cost of short-term secured paper if turnover is fast enough.
- Seasonal peaks without equity — Retail and distribution businesses fund Q4 builds without diluting owners before the selling season.
- Keep the bank line clean — A separate inventory facility can fund one large buy while the revolver handles daily operations.
- Speed vs SBA — SBA working capital wins on rate when timing allows. Inventory financing wins when the truck leaves the dock Monday.
How underwriting thinks about inventory
Lenders care about turnover, not just cost.
- SKU quality — Is it finished goods with demand, or slow-moving dead stock?
- Advance rate — Lenders advance a percentage of appraised inventory value, not 100% of your cost basis.
- Borrowing base — Many files combine inventory + eligible AR and monitor the base as both move.
- Supplier terms — Net-30 vs prepay changes how long capital stays out.
Document inventory aging, top SKUs by revenue, and historical turn in the submission.
Worked illustration: bulk prepay (composite)
Illustration only — not a live quote.
A $19 million industrial supplies distributor negotiates net-10 prepay on a $1.1 million container buy. Normal terms are net-45. Historical turn on the product line is 75 days.
- Facility: $880,000 for seven months
- Collateral: The inbound container plus existing eligible inventory
- Repayment: Weekly as the SKU line sells through regional branches
- Why not unsecured? Size and speed — the unsecured box caps at $500,000 and does not attach to stock
Compare the full operating-company menu on short-term working capital loans.
Worked illustration: seasonal build (composite)
Illustration only — not a live quote.
A $14 million consumer goods importer builds Q3 inventory for holiday retail. Cash from last season’s sell-through is still in transit from big-box remittance cycles.
- Facility: $620,000 for five months
- Collateral: Finished goods in a bonded warehouse plus AR from prior season shipments
- Exit: Sell-through October–December; optional SBA CAPLine for next year’s cycle if bank timing fits
What not to do
- Do not label personal living expenses as inventory buys — business-purpose only.
- Do not assume dead stock qualifies at the same advance rate as fast movers.
- Do not mix this with equipment financing on the same machine — titled assets belong on equipment paper at 6%–14%.
Related paths
- Purchase order financing — one confirmed order, supplier paid first
- Accounts receivable financing — cash stuck after you shipped
- Short-term working capital vs SBA — when to bridge vs wait
- Unsecured vs equipment financing — when there is no stock to pledge
What the Uniform Commercial Code calls inventory
Article 9 defines inventory as goods, other than farm products, that fit one of four tests. They are leased by a person as lessor. They are held for sale or lease, or to be furnished under a service contract. They are furnished under a service contract. Or they are raw materials, work in process, or materials used or consumed in a business. That definition is UCC § 9-102(a)(48).
The definition is broader than finished goods on a shelf. Raw materials and work in process can be inventory. So can goods you consume in the business. Lenders do not advance the same percentage against every bucket. A pallet of finished goods with recent sell-through is easier to value than a bin of half-built assemblies. Farm products are excluded from this definition and follow their own rules.
Do not promise the same stock to two lenders. Ask whether a financing statement already covers inventory or receivables. Your counsel reads the filing. Jaken Finance Group arranges the facility and does not name the capital source.
How an SBA loan compares on size and time
The SBA 7(a) program lends up to $5 million. Maturity is 10 years or less, unless the loan finances or refinances real estate or equipment with a useful life over 10 years. Real estate maturities can run 25 years, including extensions. Allowed uses include permanent working capital and inventory. Those terms are on the SBA’s lender comparison. The 7(a) overview is the program page.
The SBA microloan program is smaller. The lender comparison says the maximum is $50,000 and maturity is no more than 6 years. The microloan program page says the maximum repayment term is seven years. The two official pages do not match, so confirm the current term before you rely on either number. Microloans can buy working capital or inventory through a nonprofit intermediary. They do not replace a seven-figure container prepay.
Jaken Finance Group arranges short-term secured facilities of $250,000 to $15 million, for 1 to 12 months, quoted per file. A complete operating-company file is typically reviewed in 3–10 business days. That speed is the reason to use inventory financing when the supplier will not wait for an SBA number. The SBA loan is often the refinance after the goods have sold and the borrowing base is calmer. Compare the choice on short-term working capital versus SBA.
Illustration: a supplier discount versus the carry
Illustration only. Not a quote.
A distributor can prepay a $900,000 buy and take 12% off the invoice. The discount is $108,000 if the supplier honors it. Normal terms would have been net 45, with no discount.
The facility advances $720,000 for four months against the inbound goods and existing eligible stock. Assume, for this example only, that the all-in cost of the facility for those four months is $36,000. The discount still exceeds that cost by $72,000, before storage, insurance, and any unsold remainder.
Change one fact and the math flips. If 20% of the buy is still unsold at month four, $180,000 of goods are left at the original invoice, and the discount on that slice has been given back in holding cost and markdown risk. Fast turn is the whole thesis. Dead stock does not earn the discount.
Unsecured term loans stop at $500,000 and run 3, 5, or 7 years. They do not attach to the container. Equipment loans at 6%–14% attach to a serial-numbered machine, not to SKUs. If the asset is stock, use inventory financing. If the asset is a titled machine, use equipment financing.
Borrowing-base hygiene before the first draw
Lenders advance against eligible inventory, not against every dollar on the balance sheet. Build the base the way an examiner will rebuild it.
| Bucket | Usually stronger | Usually weaker |
|---|---|---|
| Finished goods with recent invoices | Current sell-through | No sales in 180 days |
| Raw materials tied to open orders | Identified to a job | Commodity with no buyer |
| Work in process | Short cycle, known yield | Long cycle, custom, no salvage |
| Goods in your warehouse | You control the keys | Goods at a supplier you have not paid |
Ask these questions before you request terms:
- What is the aging by SKU, in units and dollars?
- What did this line turn, in days, over the last twelve months?
- Are any goods already pledged, consigned, or subject to a supplier retention-of-title clause?
- Is the warehouse yours, a 3PL, or a location in another state that needs its own filing?
- What cash will pay the facility if sell-through slips one month?
Bring trailing-twelve-month revenue, the inventory report, and the supplier’s prepay letter to the commercial loan request. Notes should name the deadline and the expected turn in days. Call (833) 264-7776 if the truck date is inside two weeks. Say so in the first sentence. A seasonal build that can wait sixty days may belong on an SBA CAPLine instead.
Stock that should stay out of the borrowing base
Not every line on the inventory subledger is collateral. Pull these out before you send a total, or the lender will pull them out and the advance will shrink late.
- Goods you hold on consignment, where title is still the supplier’s
- Customer-owned materials sitting in your building
- Packaging and samples you will not sell
- SKUs with no shipment in the last two quarters
- Inventory already described on another financing statement
Eligible goods are the ones that match the UCC inventory definition: held for sale or lease, raw materials, or work in process you actually consume in the business. A clean report shows units, cost, location, and last sale date. A single “inventory” number on a tax return is not a borrowing base.
Illustration: four weeks from purchase order to first repayment
Illustration only.
| Week | What happens | Cash |
|---|---|---|
| 0 | Supplier invoice, $600,000, due on dispatch | Facility requested |
| 1 | $480,000 advanced against the buy and existing eligible goods | Supplier paid |
| 2–6 | Goods received, counted, and released to branches | Interest accrues |
| 7 | First large shipment invoices a customer | No cash yet |
| 10 | Customer pays | Sweep against the facility |
The advance in this sketch is 80% of the $600,000 buy, or $480,000. That percentage is an example, not a rate card. Your advance will depend on turnover, location, and what else is already pledged. If the customer pays on week 10, the facility has been outstanding about two months. A 1–12 month term covers that arc. A 7(a) maturity of up to 10 years is the wrong comparison for a single container. It is the right comparison when the same build repeats every quarter and you want a permanent line.
Jaken Finance Group arranges the short facility. It does not originate it as investment-property paper, and it does not publish the capital source. Real estate loans, at 8.99%–13.5% for bridge and flip or 5.75%–10.5% for DSCR, are a separate application. Do not pledge the warehouse mortgage and the inventory on assumptions from one term sheet. Say which asset is which when you call (833) 264-7776.
Bring inventory aging, turnover by SKU, and supplier prepay terms to the first call. Fast-moving finished goods qualify at higher advance rates than slow work in process. Quotes typically return in three to ten business days on complete files.
Request inventory financing terms → · (833) 264-7776
Jaken Finance Group arranges inventory-backed working capital for U.S. operating companies. Pricing and structure quoted per file. We do not name capital sources in marketing materials.