Stock finance: plan the cash gap before buying inventory

Start with a batch, not the annual sales target

Choose the stock purchase you actually need to fund. Record product quantities, supplier deposits, final payment, transport, storage and the expected customer receipts. A forecast should cover the whole cash cycle and show money when it enters or leaves the bank. Add the company's other commitments separately so the same available cash is not allocated to two purchases.

A fictional £35,000 inventory cash gap

Imagine a company has £20,000 available for one batch. It pays a £15,000 supplier deposit on day 0, £35,000 on day 30 and £5,000 for transport and storage on day 35. Total spending before customer receipts is £55,000, leaving a £35,000 uncovered gap. The assumed £80,000 customer payment arrives on day 90. Those expected sales cannot pay the earlier supplier bills. This illustration excludes VAT, tax, payroll, other overheads and finance charges; it is neither a complete company forecast nor an available finance offer.

Stress-test the collection date

Now move that receipt to day 120 and add £1,000 of storage before payment. The uncovered gap becomes £36,000 and lasts 30 days longer. Separately, test only part of the batch selling: remove the unsold units' receipts instead of leaving the full sales forecast intact. Write down which assumption creates the largest shortfall. This gives a clearer funding question than asking for the purchase price alone.

Separate stock value from usable funding

Inventory can be considered in asset-based lending, alongside the lender's assessment of the business and assets. That does not mean every item qualifies or its entire recorded value becomes cash. Prepare a stock list with quantities, cost, age, location, ownership and recent sales. Flag damaged, obsolete or seasonal lines. Ask the proposed provider which stock it accepts, how it values it and what happens when that value changes.

Put the proposal beside the cash calendar

Check the amount actually available, release dates, repayment dates, interest, fees and any early repayment charges. Ask about existing security over the goods and whether new security or guarantees are required. Then enter the proposed payments into the forecast. A facility that arrives after the supplier deadline, or needs repayment before realistic customer receipts, leaves a timing problem to resolve.

For the wider planning picture, build a funding requirement using your own figures and dates.

Check whether a smaller purchase improves the plan

Model a smaller first batch, staged deliveries or negotiated supplier payment dates alongside borrowing. Compare the changed unit cost with the cash tied up and storage needed. Leftover seasonal stock can keep generating storage expense, so include a realistic clearance scenario. These are planning comparisons: an attractive bulk discount alone does not show that the company can comfortably fund the order.

Prepare a focused initial enquiry

Summarise what you sell, the amount and date needed, stock already held, proposed purchases and how repayment is expected to arise. Include the slower-sales scenario. Bene is an introducer for UK limited-company business-purpose enquiries. An enquiry does not establish eligibility or confirm that a stock finance facility is available. Your accountant can help review the complete company forecast.