Stock finance provides funding against eligible inventory held for sale or production. The lender applies eligibility, valuation and advance-rate rules because inventory value can change before sale.
How is borrowing availability calculated?
Assume eligible inventory is valued at $300,000 and the advance rate is 50%. Gross availability is $150,000. A $20,000 reserve reduces illustrative net availability to $130,000 before the facility limit and other conditions.
Illustrative stock-finance calculation
| Calculation step | Amount | Method |
|---|---|---|
| Eligible inventory | $300,000 | Approved valuation |
| Gross availability | $150,000 | $300,000 × 50% |
| Reserve | ($20,000) | Facility deduction |
| Net availability | $130,000 | $150,000 − $20,000 |
Actual availability can be lower because of facility caps, prior liens, concentration, aging, obsolescence and valuation method.
Which stock is commonly excluded?
Damaged, obsolete, slow-moving, consigned, work-in-progress or hard-to-liquidate inventory may be excluded or advanced at a lower rate.
Stock finance vs. purchase-order finance
Stock finance relies on inventory already owned or controlled. Purchase-order finance funds supplier costs tied to confirmed customer orders before inventory is completed.
What should a borrower review?
Check valuation, eligibility, audits, reporting, security, insurance, reserves, covenants and liquidation assumptions. Compare usable liquidity and total cost.
