Inventory financing pays for stock before it sells and is repaid as that stock turns into sales, through a line of credit, a working capital or term loan, or credit secured by the inventory itself. Rockstone Lending, a small-business funding broker in Yuma, Arizona, helps retailers and wholesalers compare these options with lending partners, who decide and set terms. Call (928) 436-5545 or apply online.
| What it is | Business funding used to buy stock, or credit secured by the inventory itself |
|---|---|
| Typical uses | Restocking, large one-time orders and opening stock for a new location |
| How it's repaid | Scheduled payments or line-of-credit repayments set by the lender, ideally as the stock sells |
| Yuma County businesses holding stock | 460 retail and 157 wholesale employer establishments in 2023 (Census County Business Patterns) |
| Who decides | The lending partner makes the credit decision and sets rates and terms |
| Where | 360 W 20th St, Yuma, AZ 85364 · (928) 436-5545 |
What is inventory financing?
The term is used in two ways. In the narrow sense, inventory financing is credit secured by the inventory itself: the lender advances part of the value of eligible stock and holds a lien on it. In the broader sense, it is any business funding used to buy stock, such as a line of credit, a working capital loan or a term loan. This page covers both.
Either way, the logic is the same. The stock has to sell, and the cash from those sales has to arrive, before the financing falls due. When goods sit on the shelf longer than the repayment schedule allows, the business pays for unsold stock out of other cash.
How inventory financing works: matching the option to the purchase
| Situation | Option often discussed | Watch for |
|---|---|---|
| Restocking that repeats through the year | Line of credit | Draw only what you need; the lender reviews the line periodically |
| A one-time large order, such as a volume discount or a new product line | Working capital loan | Whether repayment comes due before the stock sells |
| Opening stock for a new location | Term loan, often alongside equipment financing for fixtures | Inventory is only one line of the budget |
| A large stock that can serve as collateral | Inventory-secured line or loan, from lenders that offer it | Regular inventory reports, possible inspections, and which stock counts as eligible |
| Steady daily card sales and a short-term need | Merchant cash advance (not a loan) | Total cost, daily or weekly debits, stacking |
Inventory-secured financing
With inventory-secured financing, the amount available is usually tied to the value of eligible stock, a figure often called a borrowing base. Lenders commonly exclude slow-moving, obsolete or consigned goods, and value perishable items cautiously. Expect to send regular inventory reports, and possibly to allow periodic counts or inspections. The lender files a lien on the inventory, which can limit your ability to pledge it elsewhere.
Merchant cash advances for inventory
A merchant cash advance is not a loan. A funder buys a share of your future receipts and starts collecting, often daily or weekly, right away. Used for stock, that means remittances begin while the goods are still on the shelf, and the cost is fixed whether they sell quickly or slowly. If you're considering one, read merchant cash advance vs. loan and work out the total with the MCA cost calculator first.
Floor-plan financing, explained
Floor-plan financing is a specialized form of inventory financing used mainly by dealers of high-value, individually identified goods, such as vehicles or equipment. The lender pays the manufacturer or distributor for each unit and holds a lien on it, the dealer pays charges while the unit is in stock, and the lender is repaid when that unit sells. Lenders commonly check the stock against their records. It suits businesses that sell a relatively small number of expensive items, each with a serial number, rather than general retail stock.
It is a niche product. If floor-plan financing is what you are looking for, tell us, and we'll be straight about whether it is something our partners offer; the line of credit and loan options above remain alternatives.
Yuma's retailers and wholesalers by the numbers
- 460 retail employer establishments with 8,928 employees in the March 2023 pay period; 174 of them had fewer than five employees (U.S. Census Bureau, County Business Patterns 2023, Yuma County).
- The larger retail groups by count: 84 motor vehicle and parts dealers, 63 gasoline stations, 53 food and beverage stores (34 of them grocery stores), 43 health and personal care stores, 42 clothing and accessories stores, 38 general merchandise stores, 38 miscellaneous store retailers and 27 building material and garden supply dealers (same source).
- 933 retail businesses with no paid employees in 2024 (U.S. Census Bureau, Nonemployer Statistics 2024, Yuma County).
- 157 wholesale employer establishments with 2,179 employees: 83 merchant wholesalers of durable goods (27 of them machinery, equipment and supplies wholesalers) and 69 of nondurable goods (19 of them grocery and related product wholesalers). 69 of the 157 had fewer than five employees (County Business Patterns 2023).
- 203 wholesale businesses with no paid employees in 2024 (Nonemployer Statistics 2024).
These counts show how many businesses in the county hold stock. They do not measure inventory levels or how much financing those businesses use, and we have not found a public source that does.
Planning around how your stock turns
- Know your cycle. Retailers count the time from receiving goods to selling them. Wholesalers that sell on terms add the time until the customer pays. A repayment schedule shorter than that cycle means paying from other cash.
- Not all stock holds its value. Perishable, fashion and seasonal goods lose value sooner, and partners weigh that when they value collateral or size a request.
- Supplier terms are financing too. Net terms from a supplier may cost less than any loan. On the other hand, an early-payment discount can sometimes justify borrowing to pay sooner. Do the arithmetic both ways.
- Count the carrying costs. Storage, insurance, shrinkage and markdowns are part of what the inventory really costs you.
- Licensing. Retail and wholesale businesses inside Yuma city limits need a City of Yuma business license, and the city requires an Arizona Transaction Privilege Tax license before it issues one for taxable activity.
What lending partners typically look at
Rockstone Lending doesn't set requirements, and partners' criteria differ. For inventory requests, partners commonly ask about:
- Inventory reports: what you hold, what it cost and how long it has been on hand.
- Turnover and margin: how quickly stock sells and at what markup.
- Sales history: bank statements and point-of-sale reports; for wholesalers, a receivables aging report as well.
- The purchase itself: supplier invoices, purchase orders or quotes for the stock being financed.
- Existing liens and obligations: whether another lender already has a lien on inventory or all business assets, and any advances being remitted.
- Time in business and credit history of the business and, for many products, the owners.
Newer businesses have less history to show; our guide to funding a new business explains what that changes. For the general list, see the documents partners commonly ask for.
How Rockstone Lending helps
Rockstone Lending connects you with lending partners; partners make credit decisions and set rates and terms. We start with the stock: what you are buying, how long it usually takes to sell and how you'll repay. That points toward a line of credit, a loan or inventory-secured financing, and frames the request for partners that offer inventory financing. We can't promise an approval, an amount or a price.
Before accepting any offer, check the total cost, how often payments are taken, any reporting or inspection requirements, what the lien covers, and whether a personal guarantee is required. Compare all of your options on the business loans overview, read how the process works, contact our Yuma office or start an application. Restaurants buying food and supplies can also see restaurant financing, and contractors buying job materials can see contractor financing. The Arizona Western College Small Business Development Center offers no-cost advising and is independent of Rockstone Lending.
By Rockstone Lending · Updated
