Business overdraft · Stock and inventory finance
Business overdraft for Stock and inventory finance
Stock and inventory finance is funding used to buy goods for resale ahead of the season or contract that will sell them, repaid from the sales proceeds rather than from existing working capital.
How a business overdraft works for Stock and inventory finance
An overdraft on the trading account is the least complicated way to fund fluctuating stock levels: the account simply goes below zero as inventory is bought and back up as it sells. Bank overdrafts are typically the cheapest revolving option, though slower to arrange and usually requiring security and full financials. For an established wholesaler or retailer with a bank relationship, an overdraft sized to the seasonal swing is often better value than any alternative facility.
The cash-flow pattern we plan around
Cash committed to inventory two to four months before the selling season, with proceeds arriving across the season itself and slow-moving lines tying up capital longer.
What stock and inventory finance typically fund
- Seasonal stock ahead of a peak trading period
- Supplier deposits and shipment balances on imports
- Volume buys to secure a better unit price
- Inventory for a new contract or product line
Business overdraft for Stock and inventory finance: the numbers
| Typical amounts | $10,000 – $500,000 |
|---|---|
| Term | 12–12 months |
| Indicative rates | 8.5% – 19.5% p.a. |
| Repayments | No set repayment — deposits reduce the overdrawn balance |
| Speed | 3–10 business days depending on security |
| Documents stock and inventory finance usually need | ABN, GST registration and 6–12 months of bank statements · Purchase orders or supplier proforma invoices · Stock turn and sales history for the relevant lines |
Rates are indicative, change without notice and depend on the lender, product, asset, term and your credit profile at the time of application. They are not an offer of finance. Comparison rates, where shown, are true only for the example given.
Key terms
Inventory finance
Inventory finance is short-term funding used to purchase goods for resale, repaid as the stock sells, and sized against expected sell-through rather than against the total value a supplier is willing to ship.
Stock turn
Stock turn is how many times inventory is sold and replaced over a period, and it determines how long a finance facility must run before the goods it funded have generated the cash to repay it.
What is a business overdraft?
A business overdraft is a revolving credit limit attached to a business transaction account. The account can be overdrawn up to the approved limit, interest is charged daily on the overdrawn balance, and deposits automatically reduce what you owe.
How much does a business overdraft cost?
Overdrafts typically carry an interest rate on the overdrawn balance plus an annual line fee of about 1–3% of the limit and a one-off establishment fee. Because line fees apply whether or not you draw, the effective cost depends heavily on utilisation.
Is a business overdraft secured or unsecured?
Both exist. Secured overdrafts are backed by property or a general security agreement and carry lower rates and larger limits; unsecured overdrafts rely on trading performance and a director’s guarantee, and are usually capped well below $250,000.
Questions from stock and inventory finance
How does trade finance work for buying stock?
The lender pays your supplier, local or overseas, and you repay the lender 90 to 180 days later from the sales of that stock. It is revolving, so each purchase is its own transaction, and it suits importers and wholesalers with margins that cover the cost. Letters of credit and foreign currency payments can be included.
What is the best way to fund seasonal stock?
Trade finance for supplier payments, a line of credit for deposits and top-ups, and for retailers with strong card sales a merchant cash advance repaid from takings across the season. Applying two to three months before the season starts allows time for the facility to be set up before supplier deposits are due.
Can I borrow against stock I already hold?
Rarely on its own, because stock is hard for lenders to value and sell, but businesses with commercial debtors can use invoice finance to release the cash tied up in the sales cycle, and a general security agreement over the business can support a line of credit. A broker structures the combination.
What do lenders want to see for inventory finance?
Gross margin, stock turn, supplier terms, a sales history for the products and, for trade finance, supplier invoices or pro forma orders. Established importers and wholesalers with consistent sales are approved quickly; new product lines need a sales plan.