Quick answer
Inventory finance is borrowing to buy stock, where the stock itself forms part of the lender's security. It helps retailers, wholesalers, distributors and dealers hold more stock than their cash allows. Lenders value stock conservatively, favour fast-moving lines over slow ones, and often set up revolving limits. Floor plan finance for vehicle and equipment dealers is a specialised form.
Key points
- Stock forms part of the security.
- Lenders lend a portion of stock value, not all of it.
- Fast-moving, saleable stock is easier to fund.
- Floor plan finance suits vehicle and equipment dealers.
- Also called
- Stock finance, floor plan finance
- Security
- Stock, often with other security
- Structure
- Revolving limit or term
- Suits
- Retail, wholesale, dealers
Why stock ties up cash
Every item on your shelves is money you’ve spent but not yet earned back. For retailers and wholesalers, stock is often the biggest single use of cash in the business. When you want to expand your range, buy ahead of a busy season or take advantage of a bulk discount, the limit is usually how much cash you can tie up.
Inventory finance lifts that limit by lending against the stock itself.
How lenders value stock
Lenders don’t lend against the full cost of your stock. They consider:
| Factor | Effect |
|---|---|
| How fast it sells | Fast movers attract better advances |
| How easy it is to resell | Generic goods beat specialised ones |
| Shelf life | Perishables are harder to fund |
| How it’s tracked | Good stock systems give lenders confidence |
| Concentration | Diverse stock is less risky |
Security over stock is usually registered on the Personal Property Securities Register (PPSR).
Floor plan finance for dealers
Car, caravan, boat, motorcycle and machinery dealers use floor plan finance to hold display stock. The lender funds each unit as it arrives; when the unit sells, that portion is repaid. It’s a specialised product with its own rules on audits and curtailment (paying down units that haven’t sold within a set time).
Inventory finance and its neighbours
- Trade finance and import finance fund the purchase of new stock.
- Seasonal business loans cover peak-season stock-ups.
- A business line of credit offers a simpler, unsecured alternative for smaller amounts.
Not sure which fits? Tell us about your stock.
An illustrative example
A bike shop wants to carry a wider range of e-bikes ahead of spring. An inventory facility funds a portion of the stock’s value, with each bike’s share repaid as it sells. (Illustrative only.)
What else is inventory finance called?
Lenders, accountants and search engines don’t all use the same words. You’ll also see this entry described as Stock finance and Floor plan finance. In our A–Z index every one of those names points back to this page, so whichever term you searched, you’ve landed on the same thing. If a lender uses a name you don’t recognise, ask them to describe how the security, the term and the repayments work; that tells you far more than the label.
Where does it sit in the directory?
This entry lives on the trade, stock and asset shelf. It’s most often used for stock, trade and invoices, and the security usually involved is invoices, stock or orders. It is one of the quicker entries to put in place when the paperwork is ready. Its closest neighbours are:
- Trade finance — Pay suppliers now and repay once the goods have sold.
- Import finance — Pay overseas suppliers, freight and duty before the container lands.
- Export finance — Bridge the long wait between shipping overseas and getting paid.
- Purchase order finance — Fund the supplier so you can say yes to an order bigger than your bank balance.
To compare all of them at once, filter the Loan Finder by purpose and security.
Common mistakes to avoid
- Assuming every invoice qualifies. Funders exclude disputed, overdue, related-party and some progress-claim invoices, so check eligibility early.
- Overlooking concentration limits. If one customer makes up most of your sales, the available funding may be lower than expected.
- Not reading the minimum term. Some facilities have notice periods and minimum fees that matter if your needs change.
- Using it to mask thin margins. Trade and receivables funding works best when each transaction is profitable after finance costs.
- Poor record-keeping. Clean, up-to-date ledgers and stock records make approval smoother and limits higher.
What should I ask before signing up for inventory finance?
A short list of questions saves a lot of regret. Put these to any lender or specialist before you commit:
- What percentage is advanced? The advance rate on eligible invoices or stock decides how much cash you actually receive.
- Which items are excluded? Know the eligibility rules for overdue, disputed and concentrated debts or stock.
- How are fees charged? Discount charges, service fees and minimums can be structured very differently.
- Is the facility confidential? Decide whether you’re comfortable with customers knowing a funder is involved.
- What’s the minimum term and notice period? Exit terms matter if your business changes direction.
If an answer is vague, ask again or ask for it in writing. Good lenders are happy to explain their terms clearly.
Stock the shelves you need
If cash is limiting how much stock you can hold, inventory finance might be the answer. The enquiry is quick and doesn’t include a credit check. One specialist reviews it rather than your details being fanned out to a list of lenders.
Please describe your stock, how quickly it turns over and how you track it. Accurate details lead to the right facility. Start your enquiry.
Frequently asked questions
How much will a lender advance against stock?
Only a portion of its value. Lenders consider what the stock would sell for quickly, which is usually less than cost, and adjust for how fast it moves.
What is floor plan finance?
It's a revolving facility used by dealers of cars, caravans, boats and machinery to hold display stock. Each unit is repaid when it's sold.
Is inventory finance the same as trade finance?
They overlap. Trade finance pays suppliers for new purchases; inventory finance is secured by stock you hold.
What stock is hard to finance?
Perishable, fashion, highly specialised or slow-moving stock, because it's harder for a lender to sell if needed.