This product pays for goods on their way out of the business, sold as they are or built into what it makes. Payments follow the sell-through of that stock. Every example below is invented; a funding partner sets any real amount, rate and term.
At a glance
- Pays for
Raw materials and goods for resale
- Paid down
As the stock is sold or shipped
- Retail count
Thomas County, GA: 242 retail trade establishments (CBP 2023)
Purchase order financing example: steel bought ahead of a large Thomasville, GA order
Purchase order financing and inventory financing overlap when a confirmed customer order is the reason to buy materials. A Thomasville, GA fabricator that lands a large order may need steel on the floor weeks before the first invoice goes out, and the order itself is what a partner may want to see.
In an invented example, the steel costs $31,545. Six invented monthly installments of $5,456.30 at a 12.85% annual rate clear it, $32,737.80 in total and $1,192.80 more than the steel itself.
In that invented case the first payment falls before the customer pays, so the plan has to carry one installment out of existing cash; a partner may instead offer a first payment date tied to the delivery. A food plant buying jars and lids before a large order is the case in the plant machinery article.
How does inventory financing work? A Thomas County, GA store pays its supplier, then pays down as stock sells
A store orders stock, the supplier is paid from the financing, and the store pays the balance down as the goods sell. Interest runs on what is still owed, so every paydown lowers the next month's interest.
| Month | Paydown | Interest that month |
|---|---|---|
| 1 | $3,741.25 | $169.60 |
| 2 | $3,741.25 | $127.20 |
| 3 | $3,741.25 | $84.80 |
| 4 | $3,741.25 | $42.40 |
Interest over the four invented paydowns totals $424.00. If the stock sells in three months instead of four, a partner's terms decide whether the balance can be cleared early and what that saves.
County Business Patterns counted 242 retail trade establishments in Thomas County, GA for 2023, more than any other sector there, and 38.8% of them had fewer than five employees.
Inventory financing companies: what a Thomasville, GA retailer can compare across offers
Offers from different inventory financing companies can look alike until their terms are set side by side. A Thomasville, GA retailer can line up these points before choosing:
- The share of the stock's cost the partner advances, and what the store pays in cash
- Whether payments are fixed or follow sales
- The annual rate, any fees, and the total of every payment
- What the partner may take as security and for how long
- What happens to the balance if part of the stock is returned to the supplier
A business line of credit can also pay for stock, and it fits small orders that repeat; financing tied to one purchase fits a single large one. For a downtown shop weighing a draw against a supplier minimum, read the shop stock article.
Inventory financing example: a Thomas County, GA wholesaler sends unsold stock back partway through
Some suppliers take back goods that have not sold, for a credit less a restocking fee. In an invented example, a Thomas County, GA wholesaler finances a $42,850 order over three months at a 12.4% annual rate: three payments of $14,579.53 and $888.59 of interest.
After the first payment, $6,380 of the goods has not moved, and the supplier takes it back less an invented 15% restocking fee, a $5,423.00 credit. In this invented case the credit goes against the $28,713.25 balance and the last two payments drop to $11,825.93 each, so interest falls to $804.39, $84.20 less. The invented fee costs $957.00, more than the interest saved, so the return makes sense only for goods that would not sell. Whether a partner applies a supplier credit to the balance is one of the points in the comparison list above.
County Business Patterns counted 57 wholesale trade establishments in Thomas County, GA for 2023; a separate count, Nonemployer Statistics, listed 61 wholesale businesses with no paid employees in the county for 2024.
What is inventory financing? Goods for resale and raw materials, not fixtures, at a Thomasville, GA shop
Inventory financing pays for goods that leave the business again, either sold as they are or built into a product. Raw materials, packaging, parts for resale and shelf stock all count.
- Covered: raw materials, packaging, parts and finished goods for resale
- Not inventory: machines and tools, which sit on the equipment financing page
- Not inventory: payroll and rent, which a working capital loan can cover
- Outside this site: wall-attached fixtures and any building work
Freestanding gondolas and racks are equipment rather than stock, so a store adding them alongside a stock order is pricing two items that can be financed in different ways.
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