Inventory financing is a type of asset-based lending that allows businesses to use their inventory as collateral to secure a loan or line of credit. This financial solution is designed to provide companies with the necessary funds to purchase additional inventory, maintain operations, or support growth without depleting cash reserves. The amount of financing available typically depends on the value of the inventory, which is assessed by the lender.

This form of financing is particularly beneficial for retail, wholesale, manufacturing, and distribution businesses that hold significant amounts of inventory and need to manage cash flow effectively. It enables businesses to leverage their existing assets (the inventory) to generate liquidity, ensuring they can cover operational costs, capitalize on bulk purchase discounts, or quickly respond to market opportunities. Inventory financing can help businesses avoid stockouts, keep up with customer demand, and maintain competitive advantage without the need for selling equity or incurring burdensome debt.