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Inventory loans or financing can help when you're restocking inventory, testing new products, preparing for a busy season and more. Inventory loans can be effective tools in ensuring that your business runs and grows as smoothly as possible.
What's an Inventory Loan Used for?
The name “inventory loans or financing” is self-explanatory—they’re a form of debt financing used to help finance the purchase of additional inventory to sell. There are few loans or financing products built specifically for inventory needs, but instead of using these loans, we'd recommend using a business line of credit.
Business lines of credit are ideal for inventory financing, because they're revolving, they're built for smaller to mid-sized purchases, and borrowers only need to pay interest on the amount that they actually use, in most cases.
When it comes to inventory financing, you'll want your financing to be flexible, replenishable and liquid. A business line of credit checks all those boxes, and it is why we recommend one in this case.
Best Inventory Loan Overall: BlueVine
Why we like it: Among online lenders, BlueVine offers some of the largest revolving credit solutions for small businesses with limits up to $250,000. Borrowers with strong credit scores and applications will reap the benefits of BlueVine's lower APRs as well.
Borrowers with weaker applications may not benefit from those same lower rates, but at least they'll be able to qualify for financing. BlueVine offers relatively lenient requirements even among online lenders, and only requires a minimum credit score of 600 or 650, depending on if you're applying for the six-month line of credit or the 12-month.
Drawbacks: While borrowers with weaker applications will qualify, they'll be subject to relatively high fees with APRs up to 78%. These are comparatively higher than other online lenders we've reviewed and can be too expensive for some small businesses to afford. You'll need to be sure your projections are correct and that your business experiences a net positive.
Best Inventory Loan for Bad Credit: Kabbage
Why we like it: Kabbage offers a business line of credit, and although it doesn't explicitly define a personal credit score requirement, it's been reported that it generally requires a score of 560 at a minimum. Kabbage's credit score requirement is one of the most lenient requirements among online lenders and its business line of credit is also quite large for its more qualified borrowers with a maximum size of $250,000.
Additionally, Kabbage offers a revamped user experience with an intuitive app and a Kabbage card that allows for instantaneous access to your line of credit. The card alone makes Kabbage one of the most liquid financing options.
Drawbacks: Like other online lenders, Kabbage charges high rates for its lenient business line of credit. We estimate its APRs to be as high as 80%. Of course, more qualified borrowers will benefit from lower rates, but borrowers with weaker credit scores and financials will have to be sure they can afford such an expensive line of credit.
Best Inventory Loan for Good Credit: StreetShares
Why we like it: StreetShares offers a business line of credit up to $200,000 and requires a credit score of 620. StreetShares also offers a line of credit with much lower APRs than most other online lenders with a range of 8.00% - 39.99%.
If you're a veteran, StreetShares will offer additional benefits, as it was initially a lender built specifically for veterans. While you don't need to be a veteran to borrow from StreetShares anymore, veterans are still able to leverage certain discounts on rates.
Drawbacks: StreetShares doesn't lend to brand-new startups and requires that businesses be in operation for at least one year. StreetShares also requires that applicants bring in $50,000 in annual revenue, which is a bit higher than other lenders we mention on this list.
Best for Excellent Credit: Direct Lines of Credit with Vendors
Why we like it: Establishing a direct line of credit with your vendor is usually the most convenient option. These lines of credit are often referred to as net-30 accounts and operate differently from traditional business lines of credit. Vendor lines of credit are often just vendors allowing for deferred payments, and you typically don't pay interest fees.
Drawbacks: A big downside to vendor lines of credit is that vendors may not report your payments to a business credit agency. If you're looking to build out your business credit score, it may not be the best option. Additionally, you need to have a strong relationship with your vendor before being able to open a line of credit with them so this option isn't necessarily available to every business.
Best for Startups: Accion
Why we like it: Accion is a nonprofit company that connects borrowers to lenders and has specific products for startups. Credit requirements are usually quite low and, depending on your location, you usually only need a personal credit score of 575. Accion offers smaller loans than other lenders, so Accion can usually meet the smaller financing needs of startups. Accion also partners with various lenders to negotiate lower rates, which usually fall between 7.50% - 34.00%.
Drawbacks: Accion is fairly lenient with its requirements, but it does strictly mandate that startups have a secondary source of income other than the business revenue. This usually means those who have full-time jobs on top of managing their own startups are the only ones who can qualify. Additionally, Accion usually requires a referral from a partner like SCORE or SBDC.