Inventory how-to

How to finance inventory for a small store

Inventory financing means getting cash or credit so you can buy stock before you sell it.

Short answer: Inventory financing means getting cash or credit so you can buy stock before you sell it. Common options for small stores are supplier terms, a business line of credit, a term loan, or revenue-based financing tied to your sales. Pick the cheapest option you qualify for, and only borrow against stock you can actually forecast and sell within a few months.

Know your options

Supplier terms (net 30, net 60) are the cheapest financing you will find, because there is no interest if you pay on time. Ask suppliers for terms once you have a order history with them. A business line of credit from a bank gives you flexible access to cash, but you need to qualify and it usually requires some trading history. Term loans give you a lump sum to pay back over time, useful for a big one-off stock buy like a new product line. Revenue-based financing (sometimes called merchant cash advance) takes a cut of your daily sales to repay, which is easier to qualify for but usually costs more.

Match financing to how fast stock turns

If a SKU sells through in 30 days, short-term supplier credit or a revolving line makes sense. If a SKU takes 90 to 120 days to sell through, you need financing with a matching term, otherwise you are still repaying the loan when the stock is still sitting on the shelf. Work out your sell-through time per SKU before you decide how much to borrow and for how long.

Do not over-order because financing is available

Having access to credit does not mean you should order more than your forecast supports. Extra stock bought on credit becomes a monthly cost whether it sells or not. Use your sales data to size orders, and use financing to smooth out the cash gap, not to justify bigger orders than you need.

Keep a cash buffer separate from inventory financing

Inventory financing covers stock. It does not cover payroll, rent, or ad spend. Keep those costs funded separately so a slow sales month does not force you to miss a loan or supplier payment.

Step by step

  1. List your top 10 SKUs by revenue and work out average sell-through time for each.
  2. Ask your current suppliers if they offer net 30 or net 60 terms, and apply for them.
  3. If you need more than supplier terms give you, apply for a business line of credit with your bank.
  4. Size any loan or credit line against a specific order, not against general cash flow.
  5. Set a rule: never finance more stock than your 28 to 60 day sales forecast supports.
  6. Track repayment dates against expected sell-through dates so you are not still repaying for stock that has not sold.
  7. Keep a separate cash buffer for non-inventory costs so financing stays dedicated to stock.

Worked example

Say a store wants to buy 500 units of a new SKU at $10 each, a $5,000 order. Daily sales forecast for similar products is 8 units a day, so expected sell-through is about 500 / 8 = 62 days. The supplier offers net 30 terms, but the store will not have sold enough stock to cover the full invoice by day 30 (8 x 30 = 240 units sold, 260 still unsold). The store instead uses a line of credit with a 90-day term, which comfortably covers the 62-day sell-through plus a buffer.

How SteadyShelf helps

SteadyShelf does not arrange or manage financing, and it has no accounting integration to track loan repayments or cash flow. What it does give you is the sales forecast and order-by dates per SKU, so you know how much stock to buy and how fast it should sell, which is the input you need before approaching a lender or supplier for terms.

$29/month flat, unlimited products and suppliers, 30-day free trial. Run the numbers now with the free reorder point calculator.

SteadyShelf is launching on the Shopify App Store. Join early access to get the install link first.

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FAQ

Can SteadyShelf tell me how much credit I need?

Not directly, but its suggested order quantities and forecasts give you the numbers (units, cost, expected sell-through) you need to work that out yourself or bring to a lender.

Does SteadyShelf track loan or supplier payments?

No. It drafts and sends purchase orders and tracks received stock, but it has no accounting integration, so repayments and invoicing need to be handled in your accounting system.

Let SteadyShelf do this math for every SKU

Order-by dates per supplier, seasonal forecasts and draft POs for your Shopify store. $29/month after a 30-day free trial.

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