Ecommerce
Marketplace payout timing and margins.
Guide
Inventory financing: funding stock you have not sold yet
Inventory is cash on a shelf. Inventory financing lets you buy the stock now and pay for it as it sells. Whether it makes sense depends on three numbers most sellers do not check first: turnover, sell-through, and margin.
The three numbers
- Turnover: how many times a year you sell through your average inventory. Four turns means stock sits about 90 days.
- Sell-through: what share of a purchase sells at full price before markdown.
- Contribution margin: price minus cost of goods, fees, shipping, and returns.
Financing cost lives inside the margin for as long as the stock sits. Illustrative arithmetic: a hypothetical 3%-per-month facility on stock that turns in 90 days costs about 9% of the purchase; on stock that turns in 180 days, 18%. Slow-turning inventory is hard to justify financing at all.
The products
| Product | How it works | Fits | Watch for |
|---|---|---|---|
| Supplier terms (net-30/60) | Supplier ships now, you pay later | Everyone; no financing cost | Early-pay discounts you forgo; credit limits |
| Inventory loan or line | Lender advances a percentage of eligible inventory value, set by the lender | Established retailers and wholesalers | Periodic inventory audits; advance rates well below full value |
| Purchase-order financing | Funder pays your supplier for a confirmed customer order | Wholesalers with large POs from creditworthy buyers | Fees per PO; buyer must be strong |
| General line of credit | Draw to buy, repay as it sells | Businesses with history | Draw fees; annual review |
| Revenue-based advance | Lump sum, fixed daily/weekly payback | One-time buy with fast, proven sell-through | Payments start before stock arrives |
Worked example
Illustrative example with assumed pricing. An ecommerce seller buys $40,000 of a product with a 45% contribution margin that turns in 90 days. Options:
| Line of credit (12% APR + 1% draw fee) | Advance (1.22 factor, 2% fee, 13 weeks) | |
|---|---|---|
| Cost over 90 days | about $1,600 | $9,600 |
| Cost as % of purchase | about 4% | about 24% |
| Payments before stock arrives (2 weeks) | None | about $7,508 |
| Margin left after financing | about 41% | about 21% |
Both work on a 45% margin product. On a 15% margin product, only the line does. Run your own numbers in the calculator.
What lenders look at
- Sales history for the specific SKUs or category, not just total revenue.
- Inventory reports and, for larger facilities, periodic counts.
- Supplier reliability and lead times.
- Returns and markdown history.
What Fast Mula is and isn't. Fast Mula helps you compare business-funding structures and submit one inquiry. Nothing on this site is an offer, approval, guaranteed rate, or guaranteed timeline. Any funding depends on a provider's own review, and terms vary by state.
Common questions
Can a new store get inventory financing?
Dedicated inventory facilities usually want a sales history. New stores rely on supplier terms, cards, and personal capital; platform-based advances become available after a few months of sales.
Is purchase-order financing the same as inventory financing?
No. PO financing funds a specific confirmed order from a creditworthy buyer; inventory financing funds stock you intend to sell to many customers.
Related
See which options fit your numbers
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