What is stock finance?

Stock finance is funding secured against inventory. It covers stock you need to buy and stock already sitting in your warehouse, advancing a proportion of what the goods are assessed to be worth.

As the stock sells, the facility reduces. As new stock comes in, you can usually draw again. It behaves as a revolving line against an asset that keeps moving.

You will also see it called inventory finance, inventory funding or stock funding. Same product, different label.

What it is for

The classic case is seasonal buying. A wholesaler places a large order in August for goods that will not sell until November. Paying outright would leave nothing for wages and rent through the autumn. A stock facility funds the purchase, and clears as the goods sell through the peak.

It is also used to take a bulk discount worth having, to bridge long import lead times, or to release cash from inventory that has been sitting there too long.

The thing to understand before you apply

The lender values your stock on what someone else would pay for it in a hurry.

Not what you paid. Not what you will sell it for. What it would realistically fetch if the lender had to dispose of it. That figure is usually well below what owners expect, and it is the single most common reason a stock finance offer disappoints.

The logic is consistent throughout the product: the lender is asking what happens if it ever has to sell your goods itself.

Where it does not fit

If your inventory is light, or bespoke, or perishable, this is probably not your product. A revolving credit facility is usually simpler and cheaper for general short-term cash flow.

Worth knowing too that stock finance carries ongoing monitoring costs. Valuations, inspections and audits recur through the life of the facility, and they are easy to miss when comparing headline rates.