What Is Inventory Financing?

Inventory financing, a subset of asset-based financing, is a type of business loan or credit facility that uses a company's inventory as collateral. This form of financing allows businesses to secure a loan or line of credit, to purchase products that they intend to resell at a later date. It's typically used by e-commerce merchants or 3rd party merchants that sell into retail but do not have sufficient capital to purchase additional inventory. It is also typically used by seasonal businesses that need to purchase inventory for an upcoming “season” but do not have the capital to do so.