Quick answer
Stock can support funding, but it is one of the harder assets to lend against because its value falls if it must be sold quickly. Funders look at how fast it sells, how perishable or fashionable it is and who holds the title. Often it works best as part of a wider facility rather than on its own.
Key points
- Stock is valued on what it would fetch in a hurry, not on its retail price.
- Fast-moving, durable, standard goods are far easier to fund than seasonal, perishable or custom goods.
- A supplier's retention-of-title claim can sit ahead of any funder.
- Many businesses fund stock through supplier terms, a line of credit or property rather than the stock itself.
- Lends against
- Goods you own and hold to sell
- Funder looks at first
- How quickly and reliably it sells at close to cost
- Hand over
- Stock listing, turnover by line, supplier terms
- Watch for
- Suppliers with unpaid-stock claims over what you hold
Stock feels like wealth. The shelves are full, the pallets are racked, and the cost price on the system is a big number. Then you ask a funder to lend against it and discover the awkward truth: a funder values your stock at what it could sell for in a hurry, not what you hope to sell it for over the season.
That doesn’t make stock a dead end. It makes it a starting point that needs the right partner route.
What do funders look at when you offer stock?
A funder imagines liquidating your inventory in difficult conditions. The questions follow:
- Does it sell reliably? Lines that turn over steadily support funding. Slow-moving lines, end-of-range items and anything that dates quickly do not.
- Is it durable and standard? Packaged goods, building materials, auto parts and common hardware are comfortable. Perishables, seasonal fashion or heavily customised goods are not.
- Can you prove what you hold? A stock system that reports quantities and costs by line carries far more weight than an annual count in a spreadsheet.
- Whose is it? The PPSR guidance explains that suppliers who sell on retention-of-title terms can register their interest, and that an unregistered creditor may be treated as unsecured in an insolvency. In practice, stock that hasn’t been fully paid for can have another party’s claim sitting over it.
- Where is it? Stock in your own premises is simpler than stock across several sites, with third-party logistics providers or on consignment.
How does stock turn into funding?
There are three realistic shapes.
- Stock as one part of a wider facility. Some asset-based lenders include inventory alongside debtors, at a cautious value. This works for mid-sized trading businesses with proper systems.
- Funding to buy stock. Instead of borrowing against stock you hold, you fund the purchase itself, through trade and purchase order finance or by stretching supplier terms.
- Borrowing on something else. If a property or a debtor book is available, it may carry the funding more simply, with the stock simply being what the money buys.
| Approach | Lends against | Works best when | Weak spot |
|---|---|---|---|
| Inventory as part of a wider facility | Stock plus other assets | Systems are strong and goods are standard | Heavy reporting |
| Purchase-order or trade funding | A confirmed order or shipment | You know the buyer in advance | Only covers specific deals |
| Supplier terms | Your supplier’s trust | You have a long trading record | Limits are set by the supplier |
| Revolving credit | Your trading performance | Stock is seasonal | Discipline is needed to repay |
What do you need to hand over?
- A stock listing with quantities, costs and age by line.
- Sales history by product category, so a funder can see turnover.
- Supplier terms and a note on which goods are fully paid for.
- Details of where stock is held and how it’s insured.
- Your usual ABN or ACN, bank statements and financial summaries.
If you’d like a second opinion on whether stock is helping or hurting your enquiry, talk it through with us before you commit to a structure.
What are the trade-offs?
Low valuations. Even good stock may be counted at well below its shelf price. Plan on the funder’s number, not yours.
Reporting. Stock-backed facilities usually need regular reporting. That’s workload.
Timing risk. Borrowing against stock before a peak is sensible; borrowing against dead stock to survive a weak quarter just defers a problem.
Security overlap. If a bank already holds a general security agreement over everything you own, new stock funding often needs that bank’s cooperation.
How does a stock position look from the funder’s side of the table?
Imagine a funder opening your stock listing. It sorts lines into three piles. The first is fast movers that could be sold within weeks even at a discount. The second is steady lines that would take months. The third is everything else: ageing items, odd sizes, discontinued ranges and anything damaged. Only the first pile, and part of the second, will carry real weight in a funding decision.
That is why a clean-out before applying can help. Clearing dead stock does two things at once. It releases cash directly, and it makes the remaining stock look more credible as security. Marking down slow lines is uncomfortable, but a funder who sees a tidy, fast-moving range reads it as a business in control.
What is the difference between funding stock and funding the purchase of stock?
They sound alike and behave very differently. Funding the stock you already hold means a lender is relying on what it could sell. Funding the purchase means someone pays your supplier now and is repaid when your goods sell or your customer pays. The second is usually easier for newer or thinner businesses, because the funder can see the buyer, the order or the sales history behind it.
If your purchases follow a pattern, such as a seasonal buy, supplier terms and a line of credit often handle the job without anyone taking security over the shelves at all.
When is stock finance the wrong tool?
If your stock is mostly perishable, mostly custom or mostly unpaid, don’t build a plan on it. Businesses with strong trading history but limited assets often do better with unsecured cash-flow funding or a line of credit. And if you’re a retailer or hospitality operator running a seasonal swing, the seasonal income page covers the options in more depth.
Is stock the right place to start?
It might be a supporting actor rather than the lead. The simplest way to find out is to tell us what you hold, how fast it sells and whether suppliers have been paid. A person looks at the whole picture, there’s no credit check just for asking, and your details aren’t passed around a long list of lenders. Accurate answers about what you owe suppliers and what is already pledged help us pick the right route first time. See if you qualify.
Frequently asked questions
Can I borrow against stock I haven't paid for yet?
Usually not directly. Stock you haven't paid for may still belong to your supplier under a retention-of-title clause. Funding to purchase stock, such as trade finance or supplier terms, is a different route.
Is stock funding easier for some products?
Yes. Durable goods with an established resale market are more attractive than perishables, fashion lines or one-off custom items.
Do I need to be able to count my stock in detail?
It helps a great deal. Funders favour businesses with a stock system that can report quantities and values by line, because it shows the business controls its inventory.
What if my stock is seasonal?
Seasonality is manageable with the right structure, for example drawing before the peak and repaying from the sales that follow. A line of credit or a seasonal facility is often more natural than a fixed-term loan.