Key takeaways
- Find the gap first: Whether cash is trapped before you pay the supplier, while you hold stock, or after you invoice decides which facility you need.
- Eligible stock, not all stock: Advances are calculated on inventory the lender accepts. Aged, perishable, consigned or in-transit goods are often excluded or discounted.
- You fund the difference: An advance covers part of the purchase. The balance, plus freight, duty and import GST, comes from you.
- Read the whole cost: Headline monthly rates understate the total once establishment, facility, transaction, audit and currency costs are counted.
- Judge it against margin: Compare the complete dollar cost over the stock cycle with the gross profit the stock generates.
Every wholesaler and retailer hits the same problem. You pay for stock first, sell it second, and get paid third. But the useful question is narrower than "can I borrow against stock". Identify whether the cash gap occurs before the supplier is paid, while stock sits in your warehouse, or after the customer has been invoiced. That answer determines whether you need trade finance, inventory finance or invoice finance, and it is where most enquiries start in the wrong place.
Where does your cash gap actually occur?
| Structure | Main funding purpose | Assessment focus |
|---|---|---|
| Trade or import finance | Paying the supplier, covering the import cycle | The transaction, supplier, goods and repayment source |
| Inventory finance | Existing or purchased stock you are holding | Eligible inventory and sell-through |
| Purchase order finance | Fulfilling a confirmed customer order | Customer creditworthiness, the order and the margin |
| Seasonal working capital | A peak purchasing requirement | Historical cash flow and seasonal performance |
These are different products, not variations of one. With purchase order finance the lender may pay suppliers directly and look to the customer's payment as the repayment source, while still requiring broader security. Many importers use two in sequence: trade finance to pay the overseas supplier, then an inventory finance line against the landed goods while they sell through.
What counts as eligible inventory
The amount available is generally based on a percentage of eligible inventory value, and advance rates and valuation methods vary significantly by lender and stock category. Valuation may use cost, net realisable value, a wholesale liquidation figure or another basis, which is why two lenders can look at the same warehouse and reach different numbers.
Commonly excluded or discounted: aged and slow-moving stock, perishables, work in progress, goods overseas or in transit, consignment stock, customer returns, damaged items, specialised products with thin resale evidence, and anything already subject to another security interest. Sell-through history matters, but so do eligible stock value, margins, financial performance, stock ageing, supplier and customer concentration, existing debt and your inventory controls.
How much you still have to fund
This is the detail most often missed. An advance funds part of the purchase, so the balance is yours, and so are the landed costs on imported goods: freight, duty, import GST, insurance and storage. Confirm early which can sit inside the facility, because assuming they can is how a funding plan comes up short in the week the container lands.
Cost, reporting and security
Pricing varies considerably and may include interest on drawn funds, establishment charges, facility or line fees, transaction fees, minimum monthly charges, due diligence, audit and valuation costs, foreign exchange margins, letter of credit fees, renewal and early termination costs. Compare the complete dollar cost over your expected stock cycle, not a headline monthly rate.
On tax, lending and the provision of credit are input-taxed financial supplies, so interest generally does not include GST and there is ordinarily no GST credit to claim on it, per the ATO. Separately supplied services such as audit or valuation work may include GST. Interest and eligible borrowing costs may generally be deductible where the facility is used for business purposes, though the timing and treatment of particular fees should be confirmed with your accountant.
On security, inventory may support the facility without a specific mortgage over property, although guarantees, a general security agreement, PPSR registrations, priority arrangements or control over sale proceeds may still apply. Inventory is awkward security because it changes, depreciates and is sold in the ordinary course of business, so expect regular reporting and possibly physical audits.
A worked example
A homewares business plans a $400,000 seasonal stock build. Assume the lender accepts the full amount as eligible and applies a 70% advance, giving a $280,000 draw. That leaves $120,000 for the business to fund before freight, duty, import GST and insurance. That number decides whether the plan is viable.
For illustration only, interest at 1.2% a month on the drawn $280,000 across a two month cycle is about $6,720. That is an interest figure, not the total facility cost, which would also carry establishment, audit and transaction charges. At a 30% gross margin the stock generates roughly $171,000 gross profit, so illustrative interest is about 3.9% of it. Test the downside: if sell-through takes four months the interest roughly doubles, and discounting a tenth of the range by 30% costs about $12,000 in margin.
Why the timing pressure is real
If you supply large businesses on credit, the wait is measurable. The Payment Times Reporting Regulator found the average period within which reporting businesses paid 95% of their small business invoices increased from 58 to 64 days, for the period 1 January to 30 June 2025. That matters most to wholesalers extending credit and much less to retailers paid at the point of sale. For retailers the pressure is availability: ABS data recorded $4.7 billion of online retail sales in June 2025, up 13.0% year on year, and stock that has not landed cannot be sold.
Frequently asked questions
What happens if stock sells more slowly than forecast?
You carry the facility longer, so the cost rises, and as stock ages the lender may reduce what it will advance against it. Some facilities can also be reduced or cancelled. Model a slower sell-through before you commit.
Can an existing lender block a new inventory facility?
It can complicate it. If an existing financier holds a general security interest registered on the PPSR, a new inventory funder may need a priority arrangement before proceeding. Raise existing registrations early, because unwinding them later delays setup.
What matters most
Locate the gap before the product. If the pressure is paying an overseas supplier, that is a trade finance conversation. If it is capital tied up in landed stock, inventory finance. If it is a confirmed order you cannot fund, purchase order finance. Then get specific about what the lender treats as eligible, what you must contribute, and what the facility costs in dollars across a realistic sell-through period. Because eligibility rules, advance rates and valuation methods differ so much between funders, which lenders assess your stock changes the answer. EasyAsset compares more than 50 lenders, including specialist inventory and trade funders.
This article is general information only and does not take your circumstances into account. It is not financial or tax advice. Speak with your accountant about your own position before committing.
Not sure which facility fits your stock cycle? Get an inventory finance quote here.