Your growth is sitting on a shelf. We finance it.

Capital Source has been funding businesses since 2015 and manages over $500 million in active funding programs. We look beyond FICO at how a business actually performs, we have no SIC-code restrictions, and decisions can come as fast as 24 to 48 hours once we have what we need. If your working capital is tied up in a warehouse, we structure around that reality instead of asking you to change it.

What is inventory financing?

Inventory financing is a revolving line of credit secured by the inventory your business holds, with availability tied to the stock on hand and sized against its liquidation value rather than its market price. You draw funds against eligible inventory as you need them. When goods sell, the proceeds pay down the line and the balance comes back to you net of finance charges. When new inventory comes in, availability rebuilds, so the line expands and contracts with your stock and your order book.

The sizing is where this structure differs from what most owners expect. Lenders advance a percentage of the inventory’s liquidation value, not what it would sell for at retail. Net Orderly Liquidation Value (NOLV) is what your inventory would realistically bring if it were sold off in an organized, unhurried process. Forced Sale Liquidation Value (FSLV) is what it would bring if it had to be sold quickly. Both run well below market value, which is why availability on an inventory line is more conservative than the price tags on your shelves suggest.

Eligible inventory means finished goods and marketable raw materials that move. Product that turns predictably supports the line; work in process, slow-moving SKUs, and obsolete stock generally do not.

Who is inventory financing for?

Inventory financing fits product businesses whose cash converts to stock before it converts to revenue: wholesalers, distributors, manufacturers, and retailers with seasonal builds, supplier deposits, or purchase-order-driven demand. It tends to suit companies with larger financing needs, perpetual inventory, and the systems to track it. The common scenarios:

What does it take to qualify?

Because the line is underwritten on the inventory itself, the structure depends on how well you can see and document your stock. We look for an effective inventory management system, dependable financial statements, and inventory that is genuinely marketable. Expect a field exam or third-party appraisal up front and periodic reviews while the line is in place. That diligence is part of the structure: it keeps availability accurate, and it is one reason inventory financing carries more cost than some alternatives. We tell you what the diligence involves before you commit to it, not after.

Is inventory financing the right tool?

Sometimes the honest answer is not by itself. Receivables financing and invoice factoring are usually easier to implement and less expensive, because an invoice is simpler to verify and convert than goods on a shelf. If your cash is tied up in invoices rather than stock, we will generally recommend you start there.

The two structures also work well in concert. An inventory line of credit carries the goods until the order ships and an invoice is generated; that invoice can then be financed to settle the inventory line and fund the next build. We structure that handoff deliberately as part of a broader working capital program. For a worked example of a seasonal manufacturer running this exact cycle, read our piece on financing a candle manufacturer’s operating cycle.

How does the process work?

Frequently asked questions