Keep Shelves Stocked Without Draining Cash Flow
Inventory Finance
Inventory finance is borrowing secured by the inventory you hold — finished goods and raw materials — with advances limited to a percentage of eligible inventory. At Commercial Finance Partners, we structure funding solutions that align with your sales cycle, ensuring you have products available when customers need them.
Customer Testimonials
Inventory Finance Services
Maintaining adequate inventory levels is crucial for meeting consumer demand, but tying up cash in stock can strain your working capital. Inventory Finance unlocks funding specifically for your purchasing needs, letting you keep shelves stocked or production lines supplied without sacrificing other vital expenses. This arrangement is particularly beneficial for retailers, distributors, and manufacturers navigating seasonal or fluctuating sales.
Commercial Finance Partners approaches Inventory Finance by examining your sales forecasts, supplier relationships, and storage constraints. We then develop funding terms that synchronize repayment with inventory turnover, reducing pressure on your cash flow. With our guidance, you can respond quickly to market changes, avoid stockouts, and negotiate volume discounts, all while maintaining operational agility.
Steady Product Availability
Purchase enough inventory to meet demand spikes and avoid missing sales opportunities.
Optimized Cash Flow
Repay financing in tandem with actual sales, aligning costs with revenues.
Reduced Risks
Prevent overextension of working capital that might leave other expenses underfunded.
Increased Buying Power
Negotiate better deals with suppliers by placing larger, upfront orders.
Inventory Finance Business Case Studies
How Inventory Finance Helped a Growing E-Commerce Store
Maintained stock during holiday surges:
- Met sudden customer demands
- Avoided lost sales
- Managed multi-warehouse distribution
- Expanded product lines
- Improved profit margins
Inventory Finance Stabilized a Wholesale Distribution Firm
Sync purchasing with revenue inflow:
- Improved credit terms
- Strengthened supplier loyalty
- Reduced storage strain
- Lowered short-term borrowing
- Maintained constant inventory rotation
Inventory Finance Powered a Rapidly Scaling Manufacturer
Funded bulk raw material orders:
- Gained bulk purchase discounts
- Avoided production hiccups
- Increased finished goods output
- Reduced operational downtime
- Allowed for strategic R&D
The importance of
Inventory Finance
Why Choose Commercial Finance Partners:
✦
Integrated financing options with your specific sales and production cycles.✦
Simplified processes, from purchase order to final repayment.✦
We guide you on optimizing inventory levels to prevent stockouts or overstocks.✦
Provided flexible structures that adapt to seasonal or unexpected shifts.✦
We support continuous improvements in your supply chain and financial health.
How Inventory Finance Works
Lenders typically advance up to 65% of the book value of eligible inventory, or 80% of its net orderly liquidation value (NOLV) as determined by a qualified appraiser. For retailers, competition has sometimes produced advance rates of 85% to 90% of NOLV, depending on the lender, the collateral type and the borrower’s credit rating.
Advance rates on inventory are usually lower than on receivables because inventory is less liquid: a receivable only has to be collected, while goods may need to be finished and must be sold and paid for. Finished goods and commodity-like raw materials usually receive the highest rates; work-in-process is frequently excluded, and inventory stored in multiple locations may receive a lower rate because it is harder to monitor and control. Source: OCC Comptroller’s Handbook, “Asset-Based Lending”.
What Inventory Is Eligible?
Inventory must be salable and subject to the lender’s perfected first-priority interest. Lenders exclude obsolete or aged stock and consignment goods owned by another party, and ABL facilities seldom finance perishable inventory. In some industries and states, the supplier of the inventory may hold an automatic prior lien (a purchase money security interest) on the goods it sold you.
Inventory Finance for Retailers, Distributors and Manufacturers
- Retailers: most banks require daily or weekly borrowing base certificates to monitor sales and inventory trends.
- Wholesalers and distributors: businesses with substantial working capital needs frequently use revolving credit.
- Manufacturers: commodity raw materials are much easier to resell than customized items, and work-in-process is frequently excluded from the borrowing base.
Inventory finance sits within asset-based lending, where the borrowing base consists primarily of receivables and inventory and is usually weighted toward receivables — so inventory is often paired with receivables finance. For machinery, see equipment finance, where term loans commonly finance capital expenditures secured by the financed assets.
Inventory Finance FAQs
What is inventory finance?
Inventory finance is borrowing secured by the inventory a business holds, such as finished goods and raw materials. The lender advances a percentage of eligible inventory, usually within a revolving asset-based line of credit, and cash from selling the inventory is the typical source of repayment. Wholesalers, distributors and retailers with substantial working capital needs frequently use this kind of revolving credit.
How much can you borrow against inventory?
Lenders typically advance up to 65% of the book value of eligible inventory, or 80% of its net orderly liquidation value, according to the OCC’s Comptroller’s Handbook. Advance rates on inventory are usually lower than on receivables because inventory is less liquid. Finished goods and commodity-like raw materials usually receive the highest rates.
What inventory is not eligible for financing?
Lenders commonly exclude obsolete or aged stock, consignment goods owned by another party and, frequently, work-in-process. ABL facilities seldom finance perishable inventory, and inventory stored in multiple locations may receive a lower advance rate. To be eligible, inventory must be salable and subject to the lender’s perfected first-priority interest.
Can inventory finance be combined with receivables finance?
Yes. A revolving ABL facility is generally secured by working capital assets such as accounts receivable and inventory. The borrowing base is usually weighted toward receivables, and loan agreements may limit the amount of inventory in it. As inventory is sold and receivables are collected, the cash repays the revolver.
The financing solutions provided by Commercial Finance Partners were exactly what I needed. Their team was professional and helped me every step of the way
Matthew Rodriguez Business Owner