Inventory Financing in Texas
Inventory financing is a type of asset-based lending where a business uses its inventory as collateral for a loan or revolving credit line. The advance is based on the liquidation value of the inventory — typically 50–65% of cost. It is used by distributors, manufacturers, and retailers to fund inventory purchases without tying up all available cash.
- Advance rate: typically 50–65% of eligible inventory cost value
- Eligibility: inventory must be marketable, insured, and located at an accessible site
- Combined with AR: inventory lines are often part of a combined ABL facility
- Monitoring: lenders may require field exams and inventory appraisals at borrower expense
- Industries: wholesale, distribution, manufacturing, retail, agriculture
Overview
Inventory financing allows businesses with significant inventory holdings to unlock capital without selling that inventory. The lender places a lien on the inventory and advances funds — typically 50–65% of the inventory's cost value — that the business can use for operations.
The advance rate on inventory is lower than the advance rate on receivables because inventory is less liquid. A receivable represents a specific amount owed by a specific party; inventory is goods that must be sold to generate cash. If the lender has to foreclose and liquidate the inventory, it will recover less than cost value, which is why the advance rate is conservative.
Inventory financing is most commonly structured as part of a combined asset-based lending facility that also includes an AR line. The two assets — receivables and inventory — complement each other in the cash conversion cycle: the business buys inventory (draws on the inventory line), converts inventory to receivables (draws on the AR line to pay down the inventory line), and collects receivables (repays the AR line). The total availability moves with the asset base.
In Texas, inventory financing is used by agricultural input dealers (seed, fertilizer, chemical suppliers), oilfield equipment distributors, wholesale distributors of building materials and industrial products, and consumer goods importers. Retailers generally find inventory financing harder to access than manufacturers and distributors because retail inventory is often fashion-dependent or perishable, which reduces its value as collateral.
The ongoing monitoring requirement is a feature of inventory financing that distinguishes it from simpler working capital products. The lender typically conducts field exams (periodic on-site reviews of inventory records) and may require outside appraisals at the borrower's expense.
Verified Lenders
This category is being populated.
Lenders are added as they pass The Registry Standard verification. Check back or use the Get Matched form to describe your situation directly.
Frequently Asked Questions
What inventory qualifies for inventory financing?
Raw materials, work-in-progress, and finished goods can qualify if they are marketable, properly insured, and stored at a verified location. Obsolete, perishable, or consignment inventory typically does not count toward the borrowing base. Concentration limits may apply — inventory at a single location above a threshold may be excluded.
How does the lender monitor inventory value?
Most inventory lenders require regular borrowing base certificates — periodic reports showing current inventory values. They may also conduct field exams (physical inventory reviews) at the lender's discretion, typically 1–4 times per year, at the borrower's expense.
Can I use inventory financing if I also have AR financing?
Yes — combined ABL facilities covering both receivables and inventory are common. The combined facility maximizes borrowing availability by using both asset types. The AR advance rate is higher than the inventory advance rate, so receivable-heavy businesses will find more availability per dollar of assets.
Is inventory financing the same as a floor plan line?
A floor plan line is a specific type of inventory financing used primarily by dealers — auto dealers, equipment dealers, RV dealers. It finances specific, identifiable units held for sale rather than bulk inventory. Inventory financing in the broader sense includes floor plan lines but also covers raw materials and work-in-progress.
Related Categories
Page last updated: August 2026