With inventory financing, businesses pledge their inventory (finished goods, raw materials, or unsold products) as collateral to secure a loan. Inventory that is obsolete, slow-moving, or difficult to liquidate may not be eligible. Lenders will assess the liquidity and marketability of the inventory before offering financing. The lender will assess the value of the inventory and typically lend a percentage of its value, typically 20%-50% depending on industry type and market conditions. The loan can be repaid over time, and the business may use the funds for day-to-day operations or to purchase more inventory.
