Recognition
Cash tied up on the shelf, not in a ledger
Stock's been bought and paid for. It hasn't been sold yet, so there's no invoice, no customer, nothing to finance against in the normal invoice-finance sense. Just real value sitting in a warehouse or a yard.
Why it happens
Buying ahead of selling is how stock-heavy businesses actually work
Wholesalers, importers, and seasonal retailers routinely buy stock weeks or months before it's sold, sometimes an entire season's worth at once. That's not poor planning. It's how the sector operates, and it creates a real, recurring cash gap between paying a supplier and being paid by a customer.
Where this fits
The stock-specific piece of Asset-Based Lending
This sits underneath Asset-Based Lending as the stock-specific version. It's usually financed alongside receivables and plant, not instead of them, inside a wider facility. It's distinct from invoice finance because there's no invoice yet, and distinct from a general credit line because the advance is specifically secured against the stock itself, valued and audited as its own asset class.
Specialist insight
What gets valued, and what it gets valued against
A lender doesn't advance against retail price, or even what the stock cost. It advances against liquidation value (what the stock would realistically fetch if it had to be sold quickly), which sits well below normal sale price. Commercial lenders commonly quote advance rates somewhere in the 50% to 80% range of that assessed liquidation value (see ABC Finance's explanation of inventory-finance advance rates), though the real number for any specific business depends on how fast the stock moves, how specialised it is, and how easily a lender believes it could actually be sold. Fast-moving, generic stock tends to get a better rate than slow-moving or highly specialised inventory.
Where this tends to go wrong: businesses often assume the whole warehouse counts. In practice a lender will usually exclude obsolete, damaged, or slow-moving stock from the eligible base entirely, not just discount it, so the real facility size can come in smaller than a simple percentage-of-total-stock calculation would suggest.
Decision helper
What typically fits
- Wholesale and distribution businesses carrying stock between purchase and sale.
- Importers holding goods ahead of a selling season.
- Retailers with a genuine seasonal stock build, not routine day-to-day shelf stock.
Alternatives and limitations
Once the stock's been sold and there's a real customer invoice behind it, this stops being the right facility. See Invoice Finance for that stage instead. And if the stock is only one part of a wider, mixed balance sheet with meaningful receivables and equipment too, standalone stock finance is usually the wrong shape. See Asset-Based Lending for the combined version.
