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How to Find Inventory Financing for Your Small Business

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Inventory financing allows you to leverage your current inventory to obtain a loan. This can give you the working capital you need to purchase more inventory during peak times, keep your business operational during seasonal fluctuations and cover cash flow gaps while you’re waiting to make sales. Businesses with a great deal of working capital tied up in their inventory may experience cash flow problems that can be alleviated with inventory financing.

Where to find inventory financing: 4 lenders to consider

There are two different types of inventory financing available: inventory loans and inventory lines of credit.

Inventory loans provide a lump sum of funds upfront and will be paid back on a set schedule. If your business is looking for one-time financing to get started or to scale, this option could work for you.

Inventory lines of credit, in contrast,  can provide ongoing financial support, allowing you to continue drawing from available funds as needed for the agreed-upon period of time. This option typically works best for businesses with ongoing inventory needs that are substantial enough that a line of credit is preferential to a business credit card.

American Express Business Line of Credit Bluevine OnDeck Headway Capital
Type Inventory line of credit Lines of credit Inventory line of credit, inventory term loan Inventory line of credit
Rates 2.00% to 27.00% monthly fee  6.20% simple interest for a 26-week repayment term APRs starting at 29.90% for lines of credit and 29.90% for term loans 40.00%–80.00% APR
Loan amount $2,000–$250,000 Up to $250,000 Up to $100,000 for lines of credit and $5,000– $250,000 for inventory loans Up to $100,000
Minimum credit score 640 625+ 625+ 500+

American Express Business Line of Credit

American Express Business Line of Credit is one of the better-known inventory financing companies, making it a popular choice. This lender offers up to $250,000 revolving lines of credit for businesses who have been in operation for at least one year and have a 640 credit score or higher.

American Express Business Line of Credit has 6-month, 12-month and 18-month repayment terms. You can apply online, get qualified in ten minutes or less, and receive funding in one to three business days.

There are no prepayment fees, meaning that you can pay off your balance as early as you’d like without getting hit with additional costs, and you can withdraw available funds whenever you need them during the duration of the financing.

You can learn more about American Express Business Line of Credit’s inventory lines of credit here.


Bluevine lines of credit extend up to $250,000. You can get approved in as little as five minutes, and once the funds are available to you, you can receive them within hours of drawing them.

Payments are weekly for repayment periods of 6 or 12 months, and, you can draw from the available funds at any point during the financing period.

In order to apply for a Bluevine line of credit, you’ll need to meet the following qualifications:

  • 3 months of your most recent bank statements, or establish a bank connection between Bluevine and your banking institution
  • 625+ personal FICO credit score
  • 6 months or more in business
  • Minimum $10,000 in monthly business revenue

With Bluevine, you can receive funds in as little as a few hours with a bank wire option that costs $15. ACH transfers, however, are free, and still allow you to receive funding by the next business day.


OnDeck offers both inventory lines of credit and inventory loans ranging from $5,000 to $250,000 for term loans from $6,000 to $100,000 for lines of credit. Weekly repayment is available for lines of credit, and you can choose repayment terms between 3 and 24 months for inventory term loans.

The minimum qualifications for both types of inventory loans, however, are the same, and include the following:

  • 625+ personal credit score
  • Your business must have been operational for at least one year.
  • Annual revenue of at least $100,000.
  • You must have a business bank account.

You can be approved in as little as ten minutes, and receive funding within 24 hours. It may be possible to receive funding the same day you apply for it.

Headway Capital

Headway Capital offers inventory lines of credit for up to $100,000 that can be used for “legitimate” business purposes, such as securing additional inventory or to cover seasonal ups and downs that naturally come with running a business.

It’s important to note that funding availability can vary heavily from state to state with Headway Capital. Businesses in California can apply for financing up to $100,000, while those in North Carolina are only able to apply for loans up to $50,000.

Headway Capital is one of the inventory financing lenders that offer unsecured financing for loans up to $100,000, meaning that they don’t require that you use your inventory as collateral. They also state that there are no hidden fees outside of interest rates, and that includes early payment fees; you can pay off the line of credit at any point, and submit payments weekly or monthly.

The financing is flexible; once approved for the loan, and you can choose from repayment terms of 12, 18 or 24 months.

There are several eligibility requirements that you must meet to get an inventory loan from Headway Capital. Your business must:

  • Have been in operation for at least one year.
  • Have a minimum annual revenue of $50,000.
  • Located in any of the following states: Alabama, Arizona, California, Colorado, Delaware, Florida, Georgia, Idaho, Illinois, Iowa, Indiana, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Minnesota, Mississippi, Missouri, Nebraska, New Hampshire, New Jersey, New Mexico, New York, North Carolina, Oklahoma, Pennsylvania, South Carolina, Tennessee, Texas, Utah, Virginia, Washington, Wisconsin or Wyoming.

You can receive funds within one business day after approval for financing.

How to apply for inventory financing

When applying for inventory financing, there are five key steps that you need to take.

Step 1: Make sure you qualify

Before applying for inventory financing, you’ll want to ensure that you meet each lender’s minimum requirements. If you don’t, you’ll need to keep looking for other lenders or consider alternative methods of financing.

Most lenders will have minimum qualifications including:

  • A personal credit score over a certain threshold (typically at least 550+)
  • A set length of time your business has been in operation (which ranges from six months to a year or longer)
  • A minimum amount of monthly business revenue
  • No personal bankruptcies in recent years

Step 2: Gather financial documents

Before lenders will approve a loan, they want to know more about your business’s current financial standing to assess your risk as a borrower. They’ll ask for financial documents, so have the following ready:

  • Recent years of both personal and business tax returns
  • Profit and loss statements from the business
  • Bank statements for the past three months
  • Balance sheets
  • A current list of inventory and the capital you’ve invested in it
  • Financial projections for the next year, with a clear business plan for how to accomplish those goals

Step 3: Choose a lender and submit your application

There are plenty of lenders out there that offer inventory financing. It’s best to shop around and compare multiple lenders online. You’ll want to be sure that you meet their criteria and look for lenders who can offer quick loan turnaround times if needed, and offer the lowest APR rates possible.

Once you’ve chosen a lender and a type of inventory financing, submit your application.

Step 4: Undergo the due diligence process

While some online lenders can offer approval in as little as five minutes or less, many lenders may have questions during the loan review process. This is called the “due diligence process.”

They may ask for additional financial statements or information that can help them make a decision about your pending financing. You may need to submit more documents during this period, including submitting plans for what you plan to use the funds for.

Step 5: Await approval

Awaiting approval is never fun, but it’s a necessary part of the process. Once you gain approval, however, you can typically receive funds quickly, with some lenders allowing you to draw funds within a single business day.

Pros and cons of inventory financing

When considering inventory financing, it’s important to remember that it may not be right for all businesses and that there are other options that could be a better fit. There are pros and cons to each.

Pros Cons
  • Lots  of online lenders offer approval and access to funds quickly
  • There may be restrictions on how you use the funds, while other business financing options may offer more flexibility
  • It can offer improved cash flow, preventing you from having too much capital tied up in inventory
  • They’re short-term, lasting anywhere from six months to two years; businesses looking for long-term financing will likely prefer other options
  • The business owner’s individual credit and financial history needs to be strong enough for approval
  • Interest rates may be higher than other financing options

Alternatives to business inventory financing

Loans secured by inventory financing don’t strictly need to include the inventory financing options we’ve discussed above.

There are multiple alternatives to business inventory financing, including term loans, traditional business lines of credit and accounts receivable financing.

Term loans

Some businesses prefer to take out more general small business loans, which provide a lump sum upon approval that will be paid back over a set period of time. You can choose both short-term loans and long-term loans depending on your specific needs, and you can obtain these loans from traditional banks, credit unions, online lenders and lenders backed by the Small Business Administration.

These loans may require collateral, though the interest rates may be lower overall. Long-term loans are typically going to have lower interest rates than shorter-term loans.

Most traditional term loans are a little more flexible than inventory financing, allowing you to use the funds as you see fit for your business without as many restrictions.

Business lines of credit

Business lines of credit are revolving loans that allow owners to draw money from a set amount of funds, similar to using a credit card. As you pay off the funds you’ve drawn, they’re available to use again.

Business lines of credit are good options for expanding your company and increasing staff. They can also help you build your credit. Interest is only applied to the funds that are actively withdrawn from your available balance.

While applicants with bad credit can get approved for business lines of credit,  it can still be a struggle. If you have bad credit, you may need to provide personal guarantees, which hold you personally responsible for the loan should your business fail to repay.  Collateral may also be required to secure the financing, and in some cases, up-to-date paperwork may be needed every time you withdraw funds.

Accounts receivable financing

Accounts receivable financing (also known as factoring) is a type of financing that allows companies to essentially borrow money against outstanding invoices. For example, if you have an agreement with a client for a $15,000 invoice saying that they don’t need to pay for thirty days after you invoice but you need that check to pay your staff, you can use invoice factoring to get an advance on that payment.

You’re using unpaid invoices as collateral in these instances, and businesses are typically able to receive funds quickly. It’s important to note, however, that the fees on these kinds of loans may be high and that there’s not much room for negotiation.

When choosing how best to finance inventory or the general growth of your business, take some time to consider all of your options. Borrowing against your inventory is a big decision and choosing the right financing will help your business thrive and grow in the long run.


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