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BUSINESS FINANCING · CANADA & USA
Inventory Financing
Finance eligible stock purchases while keeping turnover, margins and repayment timing in view.
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What is inventory financing?
Inventory financing supports eligible goods purchased or held for sale. It may take the form of purchase funding or inventory included in an asset-based facility. Unlike equipment financing, it addresses stock you sell rather than machinery you use to operate. Saleability, turnover and margins affect the assessment.
Illustrative example: A retailer considers a bulk order ahead of peak season. Compare the purchase saving with financing, storage and markdown costs, then test slower sales. A discount is useful only if the stock can be sold and payments remain manageable.
What can you finance?
Seasonal stocking
Use sales history and supplier deadlines to plan the order, delivery and expected sell-through.
Wholesale & distribution
Account for stock turnover, customer payment terms, returns and concentration in a small number of buyers.
Materials & replenishment
Separate committed demand from forecasts and calculate the full landed cost and operating cash requirement.
Assess the stock as well as the purchase budget
Inventory value is not the same as available cash
Stock can support sales while tying up money before a customer pays. Its financing value depends on the structure and review, not simply the purchase invoice or retail selling price. Product type, age, turnover, ownership and saleability can matter. Start by explaining whether the need is buying new stock, carrying seasonal inventory or releasing cash associated with inventory already held.
Illustrative example: plan beyond the order
A retailer budgets $50,000 for a seasonal order and $5,000 for delivery and handling. With $15,000 allocated from its own funds, the preliminary gap is $40,000 before other expenses or financing costs. This is an illustration, not an offer. The repayment forecast must consider how quickly stock sells, when customers pay and whether some units need to be discounted or carried beyond the season.
Separate fast-moving stock from uncertain demand
Use actual sales and turnover information where available rather than assuming every unit will sell at the expected price. Identify obsolete items, returns, expiry dates and stock with a narrow resale market. A larger order may reduce unit cost but increase the time cash is tied up. Compare the purchasing benefit with storage, financing and markdown risk before increasing the order size.
Who can qualify for inventory financing?
Businesses should be able to explain what will be purchased, why the demand is supportable and when sales will turn into cash. Inventory aging, margins, storage, existing security and financial records can affect the assessment.
Available options depend on your business location in Canada or the USA. Include the province or state, transaction currency and any cross-border activity in your request.
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The process, step by step.
Review the request
Provide the requested documents and clarify the costs, structure and conditions of any proposal.
Complete agreed conditions
If approved and you choose to proceed, complete the agreement and required conditions before funds are disbursed.
What should you compare before proceeding?
Eligible stock
Perishable, slow-moving, specialized or obsolete goods may be treated differently or excluded.
Stock value & borrowing
Accounting value is not the same as eligible collateral value. Review valuation, reserves and reporting requirements.
Repayment if sales slow
Test the effect of lower sell-through, discounts or returns on your ability to meet payments.
Make the inventory records useful for review
Ownership, location and product detail
Prepare an inventory list that identifies product categories, quantities, cost, age and location where relevant. Explain stock held by third parties, consigned goods and any existing security interests. Physical possession does not always establish ownership. The records should reconcile with your financial information so the review can distinguish stock owned by the business from items it cannot pledge or sell freely.
Sales history and the cash conversion cycle
Show how long inventory typically remains on hand and how quickly sales turn into collected cash. Wholesale customers paying on terms create a different cycle from immediate retail payments. Include supplier payment dates, delivery lead times and seasonal patterns. This makes the request more useful than a stock total alone because it explains both the funding period and the expected repayment source.
Cross-border costs and currency
Identify the legal business, province or state and currency of purchase and sale. If goods cross borders, include relevant delivery and import-related costs and explain where the stock will be held. Currency changes and delays can affect margins and timing. Availability remains subject to the transaction and product review; it should not be assumed from the location of the buyer alone.
Test the purchase against a slower sales period
Model reduced sales and markdowns
Prepare an expected case and a slower case with more stock remaining unsold. Include storage and operating costs during the extended period, plus scheduled financing payments. If repayment requires selling every unit at full price immediately, the plan may have little room for normal variation. Consider a smaller order, phased deliveries or a different supplier arrangement before taking on the full obligation.
Understand any eligibility or reporting rules
If the structure depends on inventory as collateral, ask how value and eligibility are assessed and whether reports or inspections are required. Slow-moving or excluded stock may not support the same availability as other goods. Find out what happens when stock is sold or its value changes. The agreement’s mechanics matter as much as the initial amount being considered.
Compare cost with the purchasing benefit
A volume discount should be assessed after financing charges, freight, storage and expected markdowns. Confirm net proceeds, repayment dates and any restrictions on the use or sale of financed goods. For a recurring purchase-and-sale cycle, compare a line of credit; for a specific supplier obligation, explore trade financing. The best fit depends on when cash is needed and how it will return.
How should you monitor the stock after purchase?
Track actual sales against the forecast and identify slow-moving items early. Record returns, damaged goods and markdowns so the inventory picture remains accurate. If collection is slower than expected, update the repayment forecast rather than waiting until a payment is due. The appropriate response may include changing the next order, revising sales plans or discussing the financing position. Monitoring does not guarantee a successful season, but it gives the business better information for decisions. It also helps separate an isolated delay from a recurring mismatch between the quantity purchased and the demand that can realistically be converted into cash.
Inventory Financing compared with other options
Compare
Inventory Financing
Trade & Supplier Payment Financing
Asset-Based Lending
Primary purpose
Eligible stock or purchasing cycles
Eligible supplier payment obligations
Liquidity supported by eligible assets
Repayment / cash flow
Facility terms assessed against cash conversion
Agreed settlement and repayment arrangements
Availability and repayment governed by facility terms
Main review focus
Stock quality, sales evidence and financial profile
Supplier records, transaction and repayment source
Borrowing base, collateral and reporting
Costs to compare
Net proceeds, interest or financing charges, fees and total repayment
Net proceeds, interest or financing charges, fees and total repayment
Net proceeds, interest or financing charges, fees and total repayment
General comparison only. Availability, security and final conditions vary by business, product and location. On smaller screens, scroll the comparison horizontally.
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Explore industry →Frequently asked questions
Does all stock qualify as collateral?
No. Product type, age, location, valuation and saleability affect eligibility.
Do I need a dedicated inventory facility?
Not always. A working capital loan, line of credit or suitable ABL facility may address the need; compare the conditions.
Can seasonal purchases be considered?
Describe the order, sales evidence and collection timing. Eligibility depends on the full request.
Is a bulk-purchase discount enough to justify financing?
Not by itself. Compare the saving with total financing and storage costs, expected returns and potential markdowns. Use realistic sell-through and collection dates, and test whether the purchase still works if demand is weaker than expected.
Is this available in Canada and the USA?
Mehmi accepts financing enquiries from businesses in Canada and the United States. Include your province or state, business activity and transaction currency. Available structures and requirements vary by location and request.
What should I compare before accepting an offer?
Compare the total amount payable, upfront cash, payment frequency, security, personal guarantees and early-settlement terms. Check what happens at the end of the agreement and whether the payments remain manageable in a slower month.
Financing guides for your next step.
CANADIAN FINANCING GUIDE
Asset-Based Lending in Canada for SMEs
Explore the considerations, documents and contract questions for this financing topic.
Read article →CANADIAN FINANCING GUIDE
Working Capital Loan Canada: How to Apply
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Read article →Tell us what your business needs.
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Apply for financingFinancing is subject to application review and approval. Availability, costs, terms and documentation vary by business, product and location. This page provides general information and is not a financing offer.