Stock finance: borrowing against inventory

Stock finance is borrowing where the lender takes security over the stock a business holds or is about to buy. It is sometimes called inventory finance. UK Finance describes the wider family it belongs to, asset-based lending, as funding secured against a range of business assets, and says those can include stock, plant and machinery, property and land.

The purpose is to release cash that is tied up in goods waiting to be sold. A business that must pay suppliers before its customers pay it has a longer cash cycle, and the British Business Bank notes that the longer the cycle, the more capital the business needs. Our guide to what working capital is explains the idea.

The lender assesses your stock, agrees to lend a proportion of its value and takes security over it, and you repay as the stock sells or on agreed terms. The exact structure depends on the product, because stock is a feature of several different kinds of facility.

• Valuation. The lender looks at what the stock is and how readily it could be sold. It may ask for stock listings or inspect the stock.
• Advance. The lender usually lends against part of the value, not all of it, so the business carries some of the risk. The proportion is set by the lender.
• Security. The lender takes a legal charge over the stock, usually as part of wider security over the business’s assets.
• Repayment. This may be a drawdown that revolves as stock is bought and sold, or a loan repaid over a term.

None of these terms is fixed. Your agreement sets out how the facility is valued, drawn and repaid, so read it closely.

The main routes are asset-based lending, a secured loan and a revolving facility, and each uses stock differently. The table summarises how they compare in general terms.

Different providers specialise in different products, which you can see in our directory of asset finance lenders. For a broader view of lending against company assets, see secured business loans.

The type of stock matters because the lender has to be able to sell it if the business cannot repay. Stock that sells easily at a predictable price is easier to lend against than stock that is specialised, perishable, quickly out of fashion or seasonal.

• Lenders tend to ask what the stock could realistically be sold for, which can be less than you paid for it.
• Finished goods are generally easier to value than raw materials or work in progress.
• Stock that is damaged, obsolete or slow-moving may be excluded from what a lender will count.
• Goods you do not own outright, such as items on supplier retention terms, may not be available as security.

For a limited company, the lender usually takes a charge, which is the security a company gives for a loan. Companies House defines it that way and says a charge registered on the company’s public record must be registered within 21 days, which start the day after the charge is created.

If a charge is not registered in time, Companies House says it may be difficult to recover the debt if the company becomes insolvent, and only the court can allow an extension. Registering a charge online costs £14 as of October 2026. Lenders or their agents commonly do this, but check who is responsible in your agreement.

Stock is often charged as part of a wider arrangement. Our guide to what a debenture is explains how a lender can take security over a company’s assets, and the guide on personal guarantees covers what it means if a director is also asked to guarantee the borrowing.

Stock finance tends to suit businesses that hold meaningful stock, turn it over regularly and have a clear plan for selling it. Retailers, wholesalers and manufacturers are the usual examples.

• A shop or online seller that must buy ahead of a busy season: see our guide for retail businesses.
• A maker that buys materials and builds up finished goods before invoicing: see our guide for manufacturers.
• A business taking on a larger order than it can currently stock.

It tends to suit less well where stock is hard to value or slow to sell, or where the real cause of the cash gap is customers paying late rather than the cost of stock. In that case the funding should follow the cause.

The cost depends on the provider, the facility and the risk, so this article gives no rates. A facility can carry interest, arrangement fees and charges linked to valuing and monitoring the stock, and some include ongoing reporting requirements.

• Ask for the full list of fees and when they apply.
• Ask how often stock is valued and who pays for it.
• Ask what happens to your borrowing if the valuation falls.
• Compare total cost over the term, not only the headline rate.

Our guide on how to compare business lenders sets out how to put offers side by side.

The main risk is that the stock does not sell as planned while the borrowing still has to be repaid. Demand can fall, goods can date and a lender’s valuation can drop, which can reduce what you are allowed to borrow just when you need it.

• A fall in the value of stock can cut the amount available under a facility.
• Stock that sells slowly means the borrowing stays out for longer, increasing the cost.
• Security over stock and other assets limits what else you can pledge elsewhere.
• A director may be asked for a personal guarantee.

The alternatives are finance matched to the cause of the gap, such as invoice finance, a revolving facility, a working capital loan or longer supplier terms. Each solves a different problem.

If you buy goods for overseas trade, our guide to trade finance covers funding imports and exports.

Capzy is a credit broker, not a lender, and is paid by the lender. We can introduce you to lenders that offer asset-based lending, secured loans or revolving facilities where stock may form part of the security, but not every lender offers every product.

You can check your funding options with a soft search that does not affect your credit score. A full application to a lender may involve a hard search, and any offer is subject to status and lender criteria. Capzy does not give legal or accounting advice, so ask a solicitor about security documents and an accountant about how the borrowing is treated in your accounts.