Best Inventory Financing Loans in December 2025
Inventory financing allows businesses to purchase inventory without providing cash upfront.
Inventory financing lenders at a glance
What is inventory financing?
Inventory financing is a type of small business loan that helps small business owners buy essential inventory for their company.
Companies that require a lot of inventory, such as retail businesses and wholesalers, may be best suited for inventory financing.
Small business owners can use inventory financing for a variety of reasons, including:
- Keeping cash flow steady through seasonal fluctuations
- Meeting high consumer demand
- Refreshing product lines
- Increasing the amount of inventory supplies on hand
How inventory financing works
Inventory financing works much like any other business loan: After applying with a lender and agreeing to terms, you’ll get a lump sum of money you can use to purchase inventory. You’ll then need to repay that money, with interest and any fees, according to the loan terms.
While some lenders have specific inventory loans that can only be used for that purpose, many lenders instead have business or working capital loans that can be used for a wide range of small business expenses, including financing your inventory.
Most lenders will want some form of security, or something they can legally take to recoup their losses if you don’t repay your loan. This may be the inventory itself, other collateral like a building, a personal guarantee that you’ll repay the loan even if your business fails or a blanket lien that allows them to take your business assets.
Once a loan agreement is reached, you’ll begin making daily, weekly or monthly payments on your loan, depending on the lender and the type of loan.
While every lender sets its own maximum loan amount, you can typically finance up to 80% of your inventory’s value. This is because its value depreciates over time, and lenders want to make sure they can sell the stock and recoup their losses if you default on the loan.
The exact amount you’re approved to borrow depends on several factors, including your industry, the type and condition of the inventory and your creditworthiness as a borrower.
Types of inventory financing loans
Financing for inventory loans typically comes as either term loans or lines of credit. Picking the best inventory financing loan depends on your business’s eligibility criteria and overall needs.
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 for short-term loans 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.
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. As you repay the debt, you can continue to 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 as you need it.
Some lines of credit re-amortize after each draw. This essentially means you see one balance, the total amount you’ve borrowed, and you make payments on that. As you borrow more, that balance goes up.
Other lines of credit treat each draw as a separate installment loan. So if you have a limit of $100,000 and you draw $10,000 and then another $15,000, you’ll make payments on each of those draws until they’re paid off. This typically saves you money on interest, but can be more complicated to manage.
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, though traditional lenders may prefer scores of 670 or higher. 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 $30,000 and $240,000 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 on this list extend credit to startups after only three or six months in operation.
2. Evaluate funding times and repayment terms
How quickly you need funds can determine the type of financing you pick. Many online lenders can deliver funds within one to three business days, while some 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 may 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 on 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:
- Personal and business tax returns
- Bank statements
- Current inventory list
- Balance sheet
- Profit and loss statement
- Future sales prediction
5. Apply and review
Once you have narrowed down the most ideal inventory financing companies, you can submit an official application.
Thoroughly review the business loan agreement before accepting an offer to ensure you understand all of the loan’s terms and conditions.
Pros and cons of inventory financing
Pros
-
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.
Cons
-
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 may 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 may come with higher rates than traditional business or SBA loans.
Repayment term
Inventory loans are often provided by alternative online lenders that might 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.
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 loan lenders charge origination fees, late charges and business loan prepayment penalties. Make sure to add these to the total loan cost to verify you can afford the cost.
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
Best for: Businesses with a large number of unpaid invoices
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.
Merchant cash advance
Best for: Businesses that need quick access to capital or have revenue that fluctuates throughout the year.
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.
Purchase order financing
Best for: Wholesalers and distributors.
Purchase order financing helps businesses pay for the raw or finished 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.
SBA 7(a) loans
Best for: Businesses looking for longer-term financing.
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
Best for: Purchasing equipment quickly.
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 partner lender. Vendor financing can either come in the form of a loan or a lease.
However, since vendor financing prioritizes speed and convenience, be aware that it often comes with higher rates.
Our methodology: How we chose the best inventory financing companies
We reviewed the leading inventory financing companies to determine the overall best seven inventory finance loans. To make our list, lenders had to meet the following criteria:
- Rates and terms: We prioritized inventory lenders offering competitive fixed rates with fewer fees and flexible repayment terms.
- Quick funding times: We know that businesses often can’t afford to wait for lengthy funding processes, so we prioritized inventory lenders with funding times within one to three business days.
- Eligibility requirements: To include financing options for a variety of borrowers, we included lenders with a wide range of credit score, time in business and annual revenue requirements, focusing on the best lenders for specific situations.
- Repayment experience: We considered 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.