Mossdale Lending Group, a small-business funding broker in Pasco, Washington, explains inventory financing: funding to buy goods before they sell, usually secured by the goods themselves. This page covers how it works, UCC filings, floor plan financing, online sellers, Franklin County retail and wholesale figures, and when a line of credit fits better. Partners decide.
| What it is | Funding to buy goods for resale |
|---|---|
| Collateral | The stock itself, typically backed by a UCC notice |
| Partners review | Sell-through speed, vendor invoices, monthly sales |
| Retail employer count, Franklin County, WA | 228 establishments (CBP 2023) |
| Franklin County, WA wholesale employers | 138 establishments (CBP 2023) |
| Who decides | The lending partner |
How inventory financing works
The partner either advances the money for stock or settles the supplier's invoice itself. The inventory becomes collateral, and you repay as it sells, either on a fixed schedule or as each item moves. Because the goods secure the deal, partners care about how quickly they sell and what they would be worth if they had to be sold off.
Advance amounts are often set below the cost of the goods, because resale value is lower than retail value. The partner's appraisal method is worth asking about early.
The UCC notice a stock lender files
To secure inventory, a partner usually files a UCC financing statement, a public notice that it holds a security interest in the goods. The filing may name specific stock or all inventory. A broad filing can affect your ability to finance other assets later, so read the collateral description carefully and ask when the filing will be released after payoff.
Floor plan financing, with an example
Floor plan financing is a form of inventory financing for high-value, serial-numbered goods, such as equipment on a dealer lot. The partner pays for each unit; the dealer repays that unit's share when it sells, plus interest or fees for the days it sat unsold. Partners audit the lot to confirm every financed unit is still there or has been paid off.
A hypothetical example: a dealer stocks three units through a floor plan. One sells in the first month, and the dealer repays that unit's advance from the sale. The other two keep accruing charges until they sell. Slow-moving units cost the most, which is why turnover is the first thing to examine.
Selling online or in a Pasco, WA shop
Online sellers can finance inventory the same way, but partners often look at marketplace payout history and returns as well as bank deposits. Sellers who keep stock in a third-party warehouse should expect questions about where the goods are and who controls them.
Franklin County, WA counted 228 retailers and 138 wholesalers with payroll in 2023 (U.S. Census Bureau, County Business Patterns 2023). Another 399 retail businesses reported receipts with no paid employees in 2024 (Census Nonemployer Statistics 2024), a separate program and year. Many of these are the kind of businesses that buy stock ahead of sales. The Pasco, WA page has more on the local employer mix.
Turnover: the number partners look at first
Turnover measures how many times your stock sells through in a year. Take a year's cost of goods sold and divide it by the stock you typically hold. A store that sells through its stock six times a year ties up money for about two months per cycle; one that turns it twice ties it up for about six. Partners prefer the faster cycle because their collateral converts to cash sooner.
Work out your own figure before calling. If some product lines move far slower than others, say so: a partner may finance the fast movers and leave the rest out, which is often a better deal than a single blended advance.
What partners review
- Supplier invoices or purchase orders for the goods.
- Inventory turnover: how many times stock sells through in a year.
- Sales history by month, from bank deposits or a sales platform.
- Any lien already recorded against stock or other business assets.
- How and where the inventory is stored and counted.
The full path from a first call to an answer is on the process page.
Five questions for an inventory offer
- Does the advance cover the invoice cost, or a percentage of it?
- Is repayment fixed, or tied to each sale?
- Will the partner audit or count the stock, and how often?
- What happens to unsold goods at the end of the term?
- When is the UCC filing released after payoff?
Stock financing versus a revolving line
If you restock several times a year in smaller amounts, a revolving line of credit can be simpler than a new inventory deal each time. If the purchase is a single large order, such as an opening stock or a bulk buy at a discount, a dedicated inventory facility may fit better.
See all six options side by side, or the sector overview for how retailers, restaurants and contractors each use inventory money.
By Mossdale Lending Group · Updated