Best Inventory Loans for Your Small Business

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Whether you’re stocking up on inventory in anticipation of your busy season or testing a new product, inventory financing can help your scale your business. We researched dozens of lenders and financing options to help you find inventory loans best suited to your small business.

Best Inventory Loan Overall: Vendor Line of Credit

Vendor lines of credit are probably your best option when it comes to financing inventory and supply purchases, and what’s more, they’re not technically a loan so you aren't going to be paying any interest. Once you’ve established a good working relationship with your vendors and suppliers, you may be able to negotiate a line of credit with them. These lines don’t function like a traditional line of credit; instead, you can order inventory and defer payments for a certain period of time. In most cases, this is up to 30 days, but it can be longer for established businesses and shorter for new companies. These vendor lines are sometimes referred to as "net 30 accounts". Most vendors and suppliers are willing to extend these terms to businesses they’ve worked with successfully.

Some vendors will report these trade lines to business credit agencies, such as Dun & Bradstreet or Experian. Establishing positive payment history with your vendors will help you build or improve your business credit score, which can be great for new businesses that have no documented trade records on their credit reports. The Dun & Bradstreet Paydex Score, for instance, is based primarily on your payment history with different suppliers and vendors.

Best for: Any business that has positive trade experience with its vendors and suppliers.

Other Inventory Loans to Consider

If a vendor line of credit isn’t an option, here are some other options that may work for your business:

  • Term loan or line of credit, whether from the bank or backed by the Small Business Administration
  • Small business credit card for small batches of inventory
  • Online lenders for newer businesses and borrowers with lower credit scores or who need funds quickly

The second best option after a vendor line of credit is securing a traditional bank loan or SBA loan. The SBA, in particular, has a variety of loan programs that fit almost any type of inventory or purchasing need -- this includes standard term loans, lines of credit and microloans. Some of these loans are even available to new businesses. While banks also provide term loans and lines of credit, some lenders may even provide specialty inventory financing where the inventory being purchased is used as collateral for the loan. For either option, you’ll need to speak with your bank to get started (the SBA has a handy tool on their website that shows all SBA lenders in your area).

Another option to consider is a small business credit card if you are purchasing a small batch of inventory. Credit limits on credit cards may not exceed $40,000 or $50,000, but you could easily use a card to purchase $10,000 to $20,000 worth of inventory. This may be a good option if you are market-testing a new product.

In other cases, we recommend business owners look at online lenders. These types of lenders can be a better fit for borrowers with lower credit scores, new businesses or borrowers who need funds very quickly. Below are some of our picks that meet these needs. In general, most online lenders offer similar rates and have similar eligibility criteria, so there isn't a lot of differentiation. We recommend borrowers look for lenders where they comfortably exceed the minimum criteria to improve their chances of getting approved and hopefully getting a reasonable interest rate.

LenderAmountsAPRsCredit ScoreMin. Business AgeMin. Annual RevenueFunds as Fast as
PayPal Working Capital$1,000 - $200,00015.00% - 30.00%None3 months$15,000 (PayPal sales)Same day
Fundbox$100 - $100,00013.00% - 60.00%None3 months$25,000Next business day
Kabbage$2,000 - $150,00020.00% - 80.00%None12 months$50,000Same day
Credibly$5,000 - $250,0001.15x - 1.49x5006 months$120,000Two days
OnDeck$5,000 - $500,0009.30% - 99.70%50012 months$100,000One day
SnapCap$5,000 - $600,00019.99% - 49.99%5509 months$100,000One day
QuarterSpot$5,000 - $200,00020.00% - 48.00%55012 months$200,000One business day
BlueVine$5,000 - $250,00015.00% - 78.00%6006 months$120,000One day
StreetShares$2,000 - $250,0008.00% - 39.99%62012 months$25,000Two days

What to Consider When Getting an Inventory Loan

While you can find specialty inventory financing, most term loans and lines of credit can also be used to purchase supplies and inventory. And like we mentioned above, one of the best ways to get some “financing” for purchasing inventory is leveraging the relationships you already have with your vendors and suppliers. Net 30 accounts can be a great way to increase your inventory without causing major cash flow issues.

If you decide to apply for a specific inventory financing product, be aware that you may have to get the inventory audited as part of the due diligence process. This is because the inventory will secure the loan, so the lender will want a complete look at the inventory you’re planning on purchasing and your business’s finances. Lenders may look at your past sales volume, inventory turnover rate, loss or damage rate of inventory and your profit margins. If you use accounting or inventory software, you should be able to produce these records easily. Other types of specialty financing that you can use for purchasing inventory, such as purchase order financing or accounts receivable financing, may require similar documentation.

You can avoid some of the due diligence headaches if you opt for a standard loan or line of credit. While banks and online lenders will require financial documentation for your business, it normally won’t include a full survey of your inventory. Whether you apply at a bank or online lender will depend on your situation. Online lenders, in general, have higher interest rates than banks, but generally have looser eligibility requirements and faster funding times. On the other hand, you can typically score a lower interest rate and apply for more money at a bank.

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