Stock finance, in three simple steps

What is stock finance?

Every retailer, wholesaler and maker knows the squeeze: you have to buy the goods before you can sell them. For a few weeks or months, your money sits on shelves, in a warehouse or on a ship.

Stock finance funds that period. It’s not one product but a family of options that let you buy inventory now and repay as it sells. Done well, it lets a business take on a bigger season, accept a bulk discount or fill a large order without draining the bank account.

When does stock finance make sense?

Three common moments:

1. Before a peak season. Christmas for toy and gift shops, spring for garden centres, end of financial year for tech resellers.
2. For a bulk-buy discount. A supplier offers a meaningful saving for a larger order paid upfront.
3. To fill a big order. A major customer orders more than your usual stock levels can support. See also purchase order finance.

It makes less sense to fund slow-moving lines, speculative stock or inventory for a business that’s struggling to sell what it already has.

What are the main structures?

Structure	How it works	Suits
Trade finance	Funds specific supplier invoices, often imports; repaid as goods sell	Importers and wholesalers
Line of credit	Draw to buy stock, repay as it sells, draw again	Ongoing, rolling purchases
Cash flow loan	Lump sum sized on turnover, typically $5k – $500k	One-off seasonal stock-ups
Property-secured loan	$20k – $5m, backed by property	Large or longer-term inventory needs

Many businesses use a line of credit for routine purchasing and a one-off cash flow loan for the big seasonal push.

How much stock should I finance?

Here’s the 1-2-3 for sizing:

• Look back. What did this category sell in the same period last year, and how much was left over?
• Look forward. What’s changed? New customers, a lost customer, price changes, a new channel?
• Leave a margin for error. Order for the realistic case, not the best case.

Business.gov.au’s advice on improving cash flow includes reducing unsold stock and considering buying closer to when customers order. Borrowed money makes that advice even more important, because unsold stock now carries a finance cost on top of its storage cost.

Illustrative example only. A camping store sells most of its tents and swags between October and January. The owner orders in August, paying the supplier upfront. A cash flow loan sized to the order covers it, and sales from November and December repay it. Last year’s leftover stock levels guided the order size, so the store isn’t still repaying for tents in winter.

Need a hand working out the right size? Start a 60-second enquiry; there’s no credit check to ask.

Can the stock itself be the security?

Sometimes. Stock in trade is one of the categories of personal property listed by the PPSR, and some lenders register security interests over inventory. But stock is constantly moving and its value on a fire sale can be much lower than its retail price, so many lenders put more weight on your cash flow, or on property, than on the stock itself.

What will a lender want to see?

• Sales history, ideally by season or category
• Supplier quotes or invoices for the stock being purchased
• Bank statements, for unsecured lending
• Stock turnover figures, if you track them
• Any existing finance, especially trade facilities or inventory security

What are the risks?

• Overstocking, which forces discounting and slows repayment
• Supplier delays, which push sales later while repayments start on schedule
• Currency movements on imports, which can change your landed cost

Plan for each with buffers in timing and amount, and talk them through with your specialist before you commit.

How do I measure stock turnover?

Stock turnover tells you how many times your inventory sells and is replaced in a year, and it’s one of the most useful numbers for sizing stock finance.

A simple way to estimate it:

1. Find your cost of goods sold for the year from your accounts.
2. Find your average stock value, for example by averaging stock on hand at the start and end of the year.
3. Divide the first by the second. The result is how many times stock turns over.

Divide 365 by that number to get roughly how many days stock sits before it sells. If stock sits for 90 days, any finance used to buy it needs to run for at least that long, plus the time customers take to pay.

Different categories often turn at very different speeds. A gift shop’s Christmas range might sell through in eight weeks, while its everyday homewares take six months. Financing the fast-moving lines and paying cash for slow movers is a common, sensible approach.

Knowing your turnover also strengthens your application, because it shows a lender you understand your own business. For a broader view, our page on working capital loans explains how stock days fit into your overall cash cycle, and purchase order finance covers funding a single large order.

Ready to stock up with confidence?

The right stock finance lets you say yes to the busy season without betting the business on it. The secret is sizing it to what you’ll actually sell.

When you enquire, there’s no credit check. A real person reviews your details and calls you, and we don’t pass your information down a long chain of lenders. Please be accurate on the form about turnover, the stock you’re buying and your timing, so we can match you properly on the first call. Ask about stock finance.