Best Inventory Financing Loans in June 2024

Inventory financing allows businesses to purchase inventory without providing cash upfront.

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The best inventory funding options in June 2024

By Jill A. Chafin and Carissa Chesanek | Edited by Abigail Bassett and Janet Schaaf | May 29, 2024
How Does LendingTree Get Paid?
LendingTree is compensated by companies on this site and this compensation may impact how and where offers appear on this site (such as the order). LendingTree does not include all lenders, savings products, or loan options available in the marketplace.

How Does LendingTree Get Paid?

LendingTree is compensated by companies on this site and this compensation may impact how and where offers appear on this site (such as the order). LendingTree does not include all lenders, savings products, or loan options available in the marketplace.
LenderUser ratingsBest for…Max. loan amountTerm lengthMin. credit scoreTime in business
(692)
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Ratings and reviews are from real consumers who have used the lending partner’s services.

Short-term loans$250,00018 to 24 months62512 monthsGet business loan offers
User ratings coming soonLines of credit$250,0006 or 12 months62524 monthsGet business loan offers
(30)
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Startups$150,0003 or 12 months600Six monthsGet business loan offers
User ratings coming soonLow-revenue companies$250,0006, 12, 18 or 24 months66012 monthsGet business loan offers
(27)
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Ratings and reviews are from real consumers who have used the lending partner’s services.

Bad credit$1,500,000Up to 18 months570Six monthsGet business loan offers
(20)
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Ratings and reviews are from real consumers who have used the lending partner’s services.

Same-day funding$600,0003 to 24 months500Six monthsGet business loan offers

Learn more about how we chose our picks.

Inventory financing lenders at a glance

OnDeck: Best inventory financing for short-term loans

Loan amounts$5,000 to $250,000
Starting interest rate27.30% (for at least 5% of customers)*
Term length18 to 24 months
Minimum credit score625
Minimum time in business12 months
Minimum annual revenue$100,000
*Minimum APR offered to at least 5% of customers (not the lowest rate offered).

Bluevine: Best inventory financing for lines of credit

Loan amounts$6,000 to $250,000
Starting interest rate6.20%
Term length6 or 12 months
Minimum credit score625
Minimum time in business24 months
Minimum annual revenue$480,000

Fundbox: Best inventory financing for startups

Loan amountsUp to $150,000
Starting interest rate
  • 4.66% for 3-month terms
  • 8.99% for 12-month terms
Term length3 or 12 months
Minimum credit score600
Minimum time in businessSix months
Minimum annual revenue$100,000

American Express Business Line of Credit: Best inventory financing for low-revenue companies

Loan amounts$2,000 to $250,000
Starting interest rate
  • 3% to 9% (6 months)
  • 6% to 18% (12 months)
  • 9% to 27% (18 months)
  • 12% to 18% (24 months)
Term length6, 12, 18 or 24 months
Minimum credit score660
Minimum time in business12 months
Minimum annual revenue$36,000

Fora Financial: Best inventory financing for bad credit

Loan amounts$5,000 to $1,500,000
Starting interest rate1.10 to 1.40 factor rate
Term lengthUp to 18 months
Minimum credit score570
Minimum time in businessSix months
Minimum annual revenue$180,000

Credibly: Best inventory financing for same-day funding

Loan amounts$5,000 to $600,000
Starting interest rate1.11 factor rate
Term length3 to 24 months
Minimum credit score500
Minimum time in businessSix months
Minimum annual revenue$180,000

What is inventory financing?

Inventory financing is a type of small business loan that helps small business owners buy essential inventory for their company. Since the inventory acts as collateral to reduce lender risk, you typically don’t have to pledge personal or business assets.

Inventory financing can also refer to a type of secured business loan where you use your business inventory as collateral to fund short-term business expenses like payroll and cash-flow gaps. Companies that require a lot of inventory, such as retail businesses and wholesalers, may be best suited for inventory financing.

Types of inventory financing loans

Financing for inventory loans can come as either term loans or lines of credit. Picking the best inventory financing loan depends on your business’s eligibility criteria and overall needs.

Term loans

A business term loan is a lump sum of money provided upfront that you must repay in fixed daily, weekly or monthly installments. Repayment terms tend to range from three to 24 months, so if you’re using the funds to purchase inventory, you’ll want to consider how quickly you can resell or use that inventory to generate a profit.

Lines of credit

Unlike a term loan, an inventory line of credit provides access to revolving funding you can withdraw when needed rather than receiving a lump sum all at once. Once you repay the debt, you can withdraw funds up to your credit limit, only paying interest on the amounts you use. This type of flexible funding allows you to purchase business inventory repeatedly.

  Did you know?

You can also use your existing business inventory as collateral to secure another type of small business loan. With this type of funding, lenders consider the value of your inventory as the asset guaranteeing your loan.

When you use inventory as collateral for your business loan, you may avoid having to sign a personal guarantee, which holds you personally liable in the case of default, or having to pledge other business assets, such as equipment or property. However, the lender could seize your pledged inventory if you fail to repay the debt.

How to get inventory financing

You can get inventory financing from traditional banks, credit unions and online lenders. Here are the basic steps to follow when you’re ready to apply for a business inventory loan.

1. Review eligibility requirements

While business loan requirements can vary by lender and loan type, inventory lenders typically look at the following criteria when reviewing your application:

  • Credit score: Some private business lenders accept personal credit scores as low as 500. However, boosting your credit score before applying can improve your chances of approval and help you secure better rates and terms.
  • Annual revenue: Businesses typically need to generate between $36,000 and $480,000 in yearly sales to qualify for inventory financing. While you can get a startup business loan with no money, having some revenue will likely help you qualify for more competitive offers.
  • Time in business: Since the inventory itself secures inventory financing loans, lenders often have slightly less-strict business history requirements. Several lenders featured above extend credit to startups after only six months in operation.

2. Evaluate funding times and repayment terms

How quickly you need funds can determine the type of financing you pick. Quick business loans can typically deliver funds within one to three business days, while traditional banks and credit union business loans can take weeks or even months to process. Check with potential lenders before applying to ensure their estimated timeline will work for you.

It’s also worth knowing the repayment terms, which differ depending on the product and lender. For inventory financing, you can typically expect repayment terms to range from three to 24 months or longer.

3. Compare lenders and rates

While online lenders usually provide faster turnaround times for inventory financing, you will likely pay a higher interest rate for the speed and convenience. At the same time, traditional banks often impose stricter eligibility criteria, such as requiring a two-year business history and a high annual revenue.

You can read business lender reviews before signing the dotted line to ensure an inventory lender is the right fit for your business.

4. Gather required business documents

Each lender will require different paperwork during the loan application process. You can help speed things along by gathering the following common business loan documents in advance:

5. Apply and review

Once you have narrowed down the most ideal inventory financing companies, you can go ahead and submit an official application. Online lenders utilize the latest underwriting software to make speedy decisions, often within minutes, while traditional banks or SBA lenders could take significantly longer. Upon approval, you can expect to receive your inventory financing funds within one to three business days.

It’s a good idea to thoroughly review the business loan agreement before moving forward to ensure you understand all of the loan’s terms and conditions.

Pros and cons of inventory financing

ProsCons

  Quick funding times You can usually get the money for inventory loans within a few business days.

  Inventory can be used as collateral Business or personal assets are typically not required, making it less risky for the business owner if they should default.

  Lenient requirements Newer businesses and those with limited credit can still qualify.

  May come with fees An appraisal fee for inventory may be required, along with possible origination fees and prepayment penalties.

  Might require a minimum loan amount Depending on the lender, there might be a specific minimum loan amount to borrow for approval.

  High interest rates Interest rates can often be higher than other financing options.

How to compare inventory financing loans

Picking the best small business inventory loan can be challenging, especially if you’re eligible for multiple offers. Consider the following factors when comparing inventory finance solutions.

Interest rate: Business loan interest rates can vary based on your credit profile and other criteria. You can convert factor rates to annual percentage rates (APRs) to better compare offers. Keep in mind that inventory financing loans will typically have higher rates than traditional business or SBA loans.

Repayment term: Inventory loans are usually provided by alternative online lenders that often require daily or weekly payments instead of the more common monthly repayment schedule. Make sure to crunch the numbers in advance to ensure you can manage to repay the debt.

  Use our business loan calculator to estimate how much you could potentially borrow with an inventory business loan.

Time to fund: Emergency business loans can help cover your most urgent inventory needs within a day or two, but they often come with significantly higher fees. If you can wait, you might get better rates with a traditional bank or SBA loan.

Additional fees: Some inventory lenders charge origination fees, late charges and business loan prepayment penalties. Make sure to add these to the total loan cost to make sure it’s worth it.

Alternatives to inventory financing

Business inventory loans have many advantages, such as quick funding times and lenient eligibility requirements. However, if inventory financing isn’t a perfect fit for you, here are some other small business financing options to consider.

Invoice factoring

While inventory financing provides funds to buy inventory with either a term loan or a line of credit, invoice factoring sells your unpaid invoices to a factoring company for an advance payment. The factoring company then collects your customers’ payments on your behalf, paying you the remaining balance minus a factoring fee. This type of financing is usually best for businesses with an excessive amount of unpaid invoices.

Merchant cash advance

With a merchant cash advance (MCA), your business can receive cash as a lump sum by borrowing against future credit and debit card sales. Eligibility requirements can be more lenient, and no collateral is required, but the lender walks away with a percentage of the daily credit card sales the business makes. While this borrowing method can be expensive, it’s an option to consider if your business needs quick access to capital.

Purchase order financing

Purchase order financing helps businesses pay for the goods or materials needed to fulfill purchase orders. A purchase order financing company pays the supplier’s costs directly, allowing you to complete the order. After orders are delivered, your customer or client pays the purchase order financing company directly and you will receive the payout amount minus a fee. This type of funding is ideal for wholesalers and distributors.

SBA 7(a) loans

Backed by the U.S. Small Business Administration (SBA), the popular SBA 7(a) loan can cover various business expenses, including inventory, operating costs and equipment financing. Similar to inventory financing, the SBA 7(a) loans can come as a term loan or a line of credit with the SBA CAPLine program.

Vendor financing

Vendor financing is when an equipment or supplies vendor works alongside a lender to provide funding to a small business. A small business could purchase materials or equipment from the vendor and then finance it with the lender working with the vendor. Vendor financing can either be as a loan or a lease. However, since vendor financing prioritizes speed and convenience, be aware that it often comes with higher rates.

How we chose the best inventory financing companies

We reviewed the leading inventory financing companies to determine the overall best six inventory finance loans. To make our list, lenders must meet the following criteria:

  • Minimum time in business: Finance options available for businesses that have been operating for at least six to 24 months.
  • Minimum credit score: Eligibility criteria that includes personal FICO Scores between 500 and 660.
  • Rates and terms: We prioritize inventory lenders offering competitive fixed rates with fewer fees and flexible repayment terms.
  • Loan amounts: Loan amounts between $2,000 and $1.5 million to fit your various business needs.
  • Quick funding times: We know that businesses often can’t afford to wait for lengthy funding processes, so we picked inventory lenders with funding times within one to three business days.
  • Repayment experience: We consider each lender’s overall reputation and business practices, favoring those who report to all major credit bureaus, offer reliable customer service and provide unique perks like prepayment discounts and business coaching.

Frequently asked questions

Business owners use inventory financing to purchase essential supplies and products they can then use to turn a profit. Small or mid-sized companies that might struggle to qualify for traditional small business financing or can’t provide any assets for collateral are likely candidates for inventory financing.

Inventory financing can be a more costly way to finance business expenses. Starting interest rates can range from 3% to 35.40%, with factor rates starting as low as 1.10. While you can likely secure a better rate with a traditional or SBA lender, the higher price for inventory financing might be worth it to get the funds you need today.

Low-credit borrowers might have better luck qualifying for inventory financing than traditional small business financing since the inventory acts as collateral to help reduce lender risk. While you will still need to undergo a credit check when applying for inventory financing, some lenders extend credit to those with scores as low as 500.