Best Inventory Loans for Your Business

Inventory is the lifeblood of many small businesses, especially retailers, wholesalers and seasonal sellers. But to meet demand or replenish your product, sometimes you need funding upfront — and you just don’t have the money.

JUMP TO OUR FUNDING RECOMMENDATIONS:

• Inventory lines of credit
• Inventory loans

What is inventory financing?

Inventory financing is a loan or line of credit a small-business owner uses to purchase inventory. There are several options available — some use inventory as collateral to secure the loan, while others, including many online lenders, don’t. Lenders extend inventory loans to you based on typical underwriting factors, including your credit score and cash flow.

Depending on how often you need funding, inventory lines of credit or short-term inventory loans can provide you with capital to help keep your shelves stocked.

Inventory lines of credit

A business line of credit grants you access to capital on an as-needed basis. You have a set amount of funds you can tap into when you need a boost, at which time you’ll start paying it back with interest. Though it’s possible you’ll get a higher annual percentage rate than with a term loan, the flexibility makes it convenient for recurring purchases.

Dealstruck and OnDeck offer inventory lines of credit for retailers, restaurateurs and other businesses that sell things. Dealstruck, however, restricts inventory to nonperishable items, so OnDeck is the best bet when buying food, for instance.

If your credit isn’t up to par, Kabbage offers short-term loans to customers based on factors outside of your credit score, including a review of your bank accounts or payment platforms. Without the security of a credit check, however, your APR could reach into the triple digits, higher than with many other online lenders.

	LINE OF CREDIT
Good option for:
• Bad personal credit • Fast cash	• Good personal credit • Businesses with strong cash flow • Retail or food service businesses	• Good personal credit • Recurring inventory purchases
Do you qualify?
• No minimum credit score • 1+ year in business • $50,000+ annual revenue • Business checking, payment platform or accounting software required	• 600+ personal credit score • 1+ year in business • $200,000+ annual revenue	• 600+ credit score • 1+ year in business • $150,000+ annual revenue
Borrow:
$2,000 to $100,000	Up to $100,000	Up to $500,000
APR:
32% to 108%	14% to 36%	22%, plus prime rate
Learn more at Kabbage	Learn more at OnDeck	Learn more at Dealstruck

Inventory loans

Unlike lines of credit, you start paying back your inventory loan as soon as you accept funding. But lower APR makes term loans wiser for large inventory purchases you want to pay back over the course of a few months or a year.

Fundation and Funding Circle both offer loans with APRs as low as 8%, though qualifying for them will be more difficult. Both lenders require solid business finances and at least two years in business; and Fundation, for example, requires you to have at least three employees (including yourself).

For business owners who are concerned about getting approved, OnDeck offers slightly looser guidelines — term loans require only a minimum 500 credit score. But remember, easier approval equals higher APRs, so you need to consider the cost of borrowing before you apply.

	TERM LOANS
Good option for:
• Bad personal credit • Companies with strong cash flow • Retail and food services	• Good personal credit • Established businesses • Growth capital	• Good personal credit • Companies with multiple employees
Do you qualify?
• 500+ personal credit score • 1+ year in business • $100,000+ annual revenue	• 620+ personal credit score • 2+ years in business • $150,000+ annual revenue	• 600+ personal credit score • 2+ years in business • $100,000+ annual revenue
Borrow:
$5,000 to $500,000	$25,000 to $500,000	$20,000 to $500,000
APR:
9% to 98%	8% to 33%	8% to 30%
Learn more at OnDeck	Learn more at Funding Circle	Learn more at Fundation

Want to size up other small-business loans?

For a look beyond inventory loans, check out NerdWallet’s small-business loans tool. We gauged lender trustworthiness, market scope and user experience, among other factors, and arranged the lenders by categories that include your revenue and how long you’ve been in business.

Compare business loans
To get more information about funding options and compare them for your small business, visit NerdWallet’s small-business loans page. For free, personalized answers to questions about financing your business, visit the Small Business section of NerdWallet’s Ask an Advisor page.

Jackie Zimmermann is a staff writer at NerdWallet, a personal finance website. Email: jzimmermann@nerdwallet.com. Twitter: @jackie_zm.

NerdWallet staff writer Teddy Nykiel contributed to this report. 

This article was updated June 24, 2016. It was originally published Nov. 9, 2015.