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Here are 7 inventory financing options
| Lender | NerdWallet Rating▼ | Max loan amount▼ | Min. credit score▼ | Next steps |
|---|---|---|---|---|
SBA 7(a) loan with Fundera by NerdWallet | Best for SBA financing | $5,000,000 | 650 | with Fundera by NerdWallet |
iBusiness Funding - Online term loan with Fundera by NerdWallet | 4.5/5 Best for established businesses | $500,000 | 660 | with Fundera by NerdWallet |
Bluevine - Line of credit with Fundera by NerdWallet | 5.0/5 Best for lines of credit | $250,000 | 625 | with Fundera by NerdWallet |
OnDeck - Online term loan with Fundera by NerdWallet | 4.7/5 Best for short-term loans | $250,000 | 625 | with Fundera by NerdWallet |
Fundbox - Line of credit | 4.9/5 Best for startups | $150,000 | 600 | Read Review |
Fora Financial - Online term loan with Fundera by NerdWallet | 4.5/5 Best for bad credit | $1,500,000 | 570 | with Fundera by NerdWallet |
American Express® Business Line of Credit* | 4.6/5 Best for low-revenue businesses | $250,000 | 660 | Read Review |
Here are 7 inventory financing options
Best for SBA financing
Best for established businesses
Best for lines of credit
Best for short-term loans
Best for startups
Best for bad credit
Best for low-revenue businesses
I'M INTERESTED IN:
Our pick for
SBA financing
SBA 7(a) loans can be used to purchase inventory, among other purposes. These loans offer low interest rates and long repayment terms.
SBA 7(a) loan
Max loan amount
$5,000,000
Min. credit score
650
Est. APR
10.75-14.25%
Pros
- Large borrowing maximums.
- Interest rates are capped.
- Long repayment terms available.
Cons
- Personal guarantee is required.
- Collateral is typically required.
- Longer processing times than online lenders.
Low interest rate
SBA 7(a) loan
Max loan amount
$5,000,000
Min. credit score
650
Est. APR
10.75-14.25%
SBA 7(a) loans can be used to purchase inventory, among other purposes. These loans offer low interest rates and long repayment terms.
7(a) loans are issued by private lenders and backed by the SBA. They offer long repayment terms and low interest rates.
Pros
- Large borrowing maximums.
- Interest rates are capped.
- Long repayment terms available.
Cons
- Personal guarantee is required.
- Collateral is typically required.
- Longer processing times than online lenders.
Qualifications:
- For-profit U.S. business.
- Unable to access credit on reasonable terms from nongovernment sources.
- Financial qualifications determined by individual lender.
Low interest rate
Our pick for
established businesses
iBusiness Funding (formerly Funding Circle) offers a longer-term loan with repayment terms up to seven years. To qualify, however, you must have a minimum credit score of 660 and at least two years in business.
iBusiness Funding - Online term loan
Max loan amount
$500,000
Min. credit score
660
Est. APR
15.22-45.00%
Pros
- Cash can be available within two business days.
- Competitive rates among online lenders.
- Terms up to seven years.
- iBusiness Funding also offers SBA loans up to $5 million.
Cons
- Charges an origination fee.
- Must be in business for a minimum of two years.
- Minimum credit score is higher than some other lenders.
May fund quickly
iBusiness Funding - Online term loan
Max loan amount
$500,000
Min. credit score
660
Est. APR
15.22-45.00%
iBusiness Funding (formerly Funding Circle) offers a longer-term loan with repayment terms up to seven years. To qualify, however, you must have a minimum credit score of 660 and at least two years in business.
iBusiness Funding acquired Funding Circle in 2024. Its online term loan is an option for established businesses that are financing an expansion or refinancing debt.
Pros
- Cash can be available within two business days.
- Competitive rates among online lenders.
- Terms up to seven years.
- iBusiness Funding also offers SBA loans up to $5 million.
Cons
- Charges an origination fee.
- Must be in business for a minimum of two years.
- Minimum credit score is higher than some other lenders.
Qualifications:
- Minimum credit score: 660.
- Minimum time in business: Two years.
- Minimum annual revenue: $50,000.
- No bankruptcies in the past seven years.
May fund quickly
Our pick for
lines of credit
Bluevine offers a fast and flexible revolving line of credit that can be used to pay for ongoing inventory or general working capital needs.
Bluevine - Line of credit
Max loan amount
$250,000
Min. credit score
625
Est. APR
20.00-50.00%
Pros
- Cash can be available within 12 to 24 hours.
- Can be used to build business credit.
- Low minimum credit score requirement.
Cons
- Requires weekly payments.
- Requires personal guarantee.
- Not available in North Dakota, South Dakota or Nevada.
- Rates can be high compared to traditional lenders.
May fund quickly
Bluevine - Line of credit
Max loan amount
$250,000
Min. credit score
625
Est. APR
20.00-50.00%
Bluevine offers a fast and flexible revolving line of credit that can be used to pay for ongoing inventory or general working capital needs.
Bluevine's 26-week line of credit provides fast working capital for short-term borrowing needs.
Pros
- Cash can be available within 12 to 24 hours.
- Can be used to build business credit.
- Low minimum credit score requirement.
Cons
- Requires weekly payments.
- Requires personal guarantee.
- Not available in North Dakota, South Dakota or Nevada.
- Rates can be high compared to traditional lenders.
Qualifications:
- Minimum credit score: 625.
- Minimum time in business: 12 months.
- Minimum annual revenue: $120,000.
- No bankruptcies in the past year.
May fund quickly
Our pick for
short-term loans
OnDeck’s short-term loan is available up to $250,000 with a maximum term of 24 months. This can be a good option if you’re looking for a lump sum inventory loan to repay relatively quickly.
OnDeck - Online term loan
Max loan amount
$250,000
Min. credit score
625
Est. APR
27.20-99.90%
Pros
- Cash can be available within the same business day (does not apply in California or Vermont).
- Accepts borrowers with a minimum credit score of 625.
- Streamlined application process with minimal documentation required.
- Can be used to build business credit.
Cons
- Cannot fund North Dakota-based businesses.
- Requires frequent (daily or weekly) repayments.
- Interest rates can be high compared with traditional lenders.
- Requires business lien and personal guarantee.
May fund quickly
OnDeck - Online term loan
Max loan amount
$250,000
Min. credit score
625
Est. APR
27.20-99.90%
OnDeck’s short-term loan is available up to $250,000 with a maximum term of 24 months. This can be a good option if you’re looking for a lump sum inventory loan to repay relatively quickly.
OnDeck offers a fast term loan for small-business owners with less-than-stellar credit who want to expand.
Pros
- Cash can be available within the same business day (does not apply in California or Vermont).
- Accepts borrowers with a minimum credit score of 625.
- Streamlined application process with minimal documentation required.
- Can be used to build business credit.
Cons
- Cannot fund North Dakota-based businesses.
- Requires frequent (daily or weekly) repayments.
- Interest rates can be high compared with traditional lenders.
- Requires business lien and personal guarantee.
Qualifications:
- Minimum credit score: 625.
- Minimum time in business: One year.
- Minimum annual revenue: $100,000.
- Must have business bank account.
May fund quickly
Our pick for
startups
Fundbox offers a revolving line of credit with short repayment terms — 12 or 24 weeks. You may be able to qualify with just three months in business.
Fundbox - Line of credit
Max loan amount
$150,000
Min. credit score
600
Est. APR
36.00-99.00%
Pros
- Financing available within one business day after approval.
- Simple application with minimal documentation required.
- Startup-friendly -- accepts borrowers with a minimum of three months in business.
- Low minimum credit score, time in business and annual revenue requirements.
- No prepayment penalties, account maintenance fees or inactivity fees.
Cons
- Rates are high compared with traditional banks.
- May require personal guarantee.
- Weekly repayments required over a short term (maximum of 24 weeks).
May fund quickly
Fundbox - Line of credit
Max loan amount
$150,000
Min. credit score
600
Est. APR
36.00-99.00%
Fundbox offers a revolving line of credit with short repayment terms — 12 or 24 weeks. You may be able to qualify with just three months in business.
Fundbox offers a business line of credit to fill a cash flow gap, and qualifying is easier than with other lenders.
Pros
- Financing available within one business day after approval.
- Simple application with minimal documentation required.
- Startup-friendly -- accepts borrowers with a minimum of three months in business.
- Low minimum credit score, time in business and annual revenue requirements.
- No prepayment penalties, account maintenance fees or inactivity fees.
Cons
- Rates are high compared with traditional banks.
- May require personal guarantee.
- Weekly repayments required over a short term (maximum of 24 weeks).
Qualifications:
- Minimum credit score: 600.
- Minimum time in business: 3 months.
- Minimum annual revenue: $30,000.
May fund quickly
Our pick for
bad credit
Fora Financial offers a short-term loan with flexible qualifications. You may be able to qualify with a minimum credit score of 570. These loans also have large maximum funding amounts — up to $1.5 million — but repayment terms max out at 18 months.
Fora Financial - Online term loan
Max loan amount
$1,500,000
Min. credit score
570
Pros
- Cash can be available quickly.
- Get a discount for prepaying.
- No collateral required.
- Low minimum credit score requirement.
Cons
- Charges a factor rate that makes it more difficult to compare costs with other lenders.
- Can’t build business credit.
- Longest loan term is 18 months.
Fora Financial - Online term loan
Max loan amount
$1,500,000
Min. credit score
570
Fora Financial offers a short-term loan with flexible qualifications. You may be able to qualify with a minimum credit score of 570. These loans also have large maximum funding amounts — up to $1.5 million — but repayment terms max out at 18 months.
Fora Financial can be a good fit for borrowers who may fall short of qualifying for traditional bank financing or young but established small businesses looking for speedy financing.
Pros
- Cash can be available quickly.
- Get a discount for prepaying.
- No collateral required.
- Low minimum credit score requirement.
Cons
- Charges a factor rate that makes it more difficult to compare costs with other lenders.
- Can’t build business credit.
- Longest loan term is 18 months.
Qualifications:
- In business for at least six months.
- At least $20,000 per month in revenue.
- No open bankruptcies or dismissed bankruptcies within the past year.
Our pick for
low-revenue businesses
You may be able to get a business line of credit from American Express with an average monthly revenue of at least $3,000. This can also be a good option for existing American Express customers, who can use their accounts to find out if they prequalify for this credit line.
American Express® Business Line of Credit*
Max loan amount
$250,000
Min. credit score
660
Pros
- Streamlined application process with minimal paperwork.
- Financing from $2,000 to $250,000 available.
- Accepts borrowers with a minimum FICO score of at least 660 at the time of application.
- Monthly repayment schedule (as opposed to daily or weekly).
- No prepayment penalties, account maintenance fees or draw fees.
Cons
- Must have online checking or PayPal account to verify cash flow.
- Personal guarantee required.
- Complex monthly fee structure makes it difficult to compare costs to other lenders.
American Express® Business Line of Credit*
Max loan amount
$250,000
Min. credit score
660
You may be able to get a business line of credit from American Express with an average monthly revenue of at least $3,000. This can also be a good option for existing American Express customers, who can use their accounts to find out if they prequalify for this credit line.
The American Express® Business Line of Credit is a good option for business owners with fair credit who want access to working capital.
Pros
- Streamlined application process with minimal paperwork.
- Financing from $2,000 to $250,000 available.
- Accepts borrowers with a minimum FICO score of at least 660 at the time of application.
- Monthly repayment schedule (as opposed to daily or weekly).
- No prepayment penalties, account maintenance fees or draw fees.
Cons
- Must have online checking or PayPal account to verify cash flow.
- Personal guarantee required.
- Complex monthly fee structure makes it difficult to compare costs to other lenders.
Qualifications:
- Minimum FICO score of at least 660 at the time of application. The required FICO score may be higher based on your relationship with American Express, credit history, and other factors.
- Must have started your business at least a year ago.
- Average monthly revenue of at least $3,000.
- All businesses are unique and are subject to approval and review.
- American Express® Business Line of Credit offers two loan types, installment loans and single repayment loans for eligible borrowers. All loan term types, loan term lengths, and pricing are subject to eligibility requirements, application, and final approval. This article contains general information about the American Express® Business Line of Credit installment loan type only.
What is inventory financing?
Inventory financing is a loan for purchasing products that your business plans to sell. The inventory you buy serves as collateral on the financing, making this a type of asset-based lending. Because of this built-in collateral, you may not have to put up additional business assets to secure the loan and inventory financing can be easier to qualify for than more traditional loan options.
You can use inventory financing to:
- Purchase inventory to prepare for your busy season.
- Cover short-term cash flow gaps.
- Buy additional stock to meet increased customer demand.
- Update product offerings or launch products.
- Purchase products in bulk at a discount.
» MORE: Best retail business loans
How does inventory financing work?
Inventory financing can be issued by banks, credit unions and online lenders. The amount of capital you receive from a lender is based on the value of the inventory you want to buy.
Although you may ask for a loan amount equal to the total cost of the inventory you’d like to purchase, many lenders will offer you only a percentage of the inventory’s value. This percentage can range anywhere from 20% to 80%, depending on the type of inventory, your qualifications and the lender.
Because the value of inventory depreciates, offering only a percentage of the loan amount asked for mitigates risk for the lender if you default on the loan and they need to sell off your inventory to recover their losses.
Types of inventory financing
Inventory financing can be structured as term loans or lines of credit. The right option for your business will depend on your specific needs.
- Inventory loans. These loans function like traditional business term loans, in which you receive a specific amount of capital and pay it back, with interest, over a period of time. Term loans may have higher borrowing amounts and longer repayment periods, making them a better choice for financing large, one-time inventory purchases.
- Inventory lines of credit. An inventory line of credit gives you access to a set amount of money that you can tap into as needed — and you pay back only what you’ve borrowed. These business credit lines are often revolving, meaning once you’ve paid back what you’ve borrowed, you again have access to the maximum approved amount and don’t need to continuously reapply for funding. An inventory line of credit offers more flexibility than a term loan and can be a good option for financing ongoing inventory purchases.
Pros and cons of inventory financing
Pros | Cons |
✅ Flexible qualification requirements. Because inventory financing is self-collateralizing, you may not need to rely as heavily on your personal credit or time in business to qualify for funding. You may also be able to avoid putting up additional assets as collateral. | ❌ Limited loan amounts. Lenders will typically offer only a percentage of the total cost of the inventory you’re looking to purchase. |
✅ Can benefit sales. This type of financing can help you meet increased customer demand, prepare for a busy season or upgrade a product line — without having to pull from cash reserves to purchase inventory. | ❌ Can be expensive. Business loan rates can be high on this type of financing compared to more traditional loan options. Although newer businesses and those with bad credit can qualify, they may receive particularly high rates. |
✅ Fast and simple application process. If your inventory records are organized, it can be quick and easy to apply for this type of loan, especially when working with an online lender. | ❌ Not all inventory is eligible. To qualify for inventory financing, the products you plan to buy need to be nonperishable, and should hold value for at least the length of your loan. |
How to get inventory financing
1. Review your qualifications
Most lenders will use your personal credit score, time in business and annual revenue to underwrite your loan application. For inventory financing, they’ll also consider the value of the inventory you’re looking to purchase, as well as any additional collateral you can offer.
Although banks and credit unions typically provide the most competitive rates and terms, you’ll likely need good credit, strong finances and multiple years in business to get funding. Online lenders, on the other hand, are usually more flexible with their qualification requirements. These lenders may work with startups or borrowers with bad credit — but they’ll charge higher interest rates.
Evaluating your business credentials ahead of time can help you better direct your financing search.
2. Compare inventory financing options
You’ll want to research several inventory financing options to determine which one is the best fit for your business. Consider comparing factors such as:
- Repayment terms. Inventory loans often have short repayment terms and may require frequent (daily or weekly) payments. You should make sure that you can afford to repay any potential debt before taking it on.
- Interest rates and fees. Inventory financing may be more expensive than traditional bank or SBA loans. You’ll want to ensure that you understand what the rates and fees are and how they’re charged. If a lender quotes interest as a factor rate, it’s helpful to calculate it into an annual percentage rate to get a better sense of the loan cost.
- Collateral requirements. Some lenders may require you to secure your loan with additional business assets. You’ll want to double check these types of requirements — and determine if you can meet them — before you apply.
- Funding speed. You may be able to get inventory financing from an online lender within 24 hours of approval. Some of these lenders charge higher rates, however, so consider if speed is worth the additional cost.
3. Gather documentation and apply
The business loan application process will vary by lender, but you’ll typically need to provide documentation such as:
- Business and personal bank statements.
- Business and personal tax returns.
- Business financial statements (e.g., profit and loss statement, balance sheet).
- Current inventory list.
- Sales records and projections.
Lenders may ask for a third-party appraisal to assess the value of the inventory you’re looking to purchase. They may also ask about your inventory turnover and inventory management system.
After you submit your application and receive approval, you may get access to funds as quickly as the same day — depending on your lender. Before signing the business loan agreement, however, you’ll want to review it to make sure the terms and rates are correct, and you’re clear about any penalties or fees.
Alternatives to inventory financing
If you’re having trouble finding or qualifying for inventory financing, there are other options to consider:
- Invoice financing or factoring: Both invoice financing and invoice factoring can help cover gaps in cash flow by advancing money on your unpaid customer invoices. With invoice financing, your unpaid invoices serve as collateral on a loan until your customer pays you. With factoring, a company purchases your unpaid invoices at a discount, and takes over collecting the money from your customers.
- Business credit card: Similar to a line of credit, a business credit card is a revolving line that only charges interest on money you have spent on the card. As you pay down the card, you can spend money on it again.
- Purchase order (PO) financing: Similar to inventory financing, purchase order financing is a lump sum of money that can be used to cover cash flow gaps. While inventory financing can be used for general inventory needs, however, PO financing is tied to the needs of a specific purchase order.
- Equipment financing. If your business is not inventory-heavy, but you want a self-collateralizing loan option, equipment financing allows you to purchase business equipment and use it to secure your loan.
Last updated on July 11, 2024
Methodology
NerdWallet’s review process evaluates and rates small-business loan products from traditional banks and online lenders. We collect over 30 data points on each lender using company websites and public documents. We may also go through a lender’s initial application flow and reach out to company representatives. NerdWallet writers and editors conduct a full fact check and update annually, but also make updates throughout the year as necessary.
Our star ratings award points to lenders that offer small-business friendly features, including:
- Transparency of rates and terms.
- Flexible payment options.
- Fast funding times.
- Accessible customer service.
- Reporting of payments to business credit bureaus.
- Responsible lending practices.
We weigh these factors based on our assessment of which are the most important to small-business owners and how meaningfully they impact borrowers’ experiences.
NerdWallet does not receive compensation for our star ratings. Read more about our ratings methodology for small-business loans and our editorial guidelines.
Wondering if you qualify?
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