Inventory financing is business funding used to buy stock, secured by that stock and paid down as it sells or on a set schedule. Sandland Credit, a small-business funding broker in Grand Junction, CO, explains how inventory financing, floor plans and factoring differ and connects Mesa County retailers and wholesalers with lending partners, who make the credit decision and set terms.
| Built for | Buying stock before it sells |
|---|---|
| Security | The inventory itself, usually recorded with a UCC financing statement |
| Repayment | As goods sell, or on a fixed schedule |
| Mesa County retail | 587 retail employer establishments (Census CBP 2023) |
| Mesa County wholesale | 218 wholesale employer establishments (Census CBP 2023) |
| Decision and pricing | Made by the lending partner, not Sandland Credit |
| Office | 516 Main St, Grand Junction, CO 81501 · (970) 238-2048 |
How inventory financing works
A lender advances money to buy goods for resale, and the goods secure the debt. Because inventory can lose value, lenders usually advance less than the full cost, and they value different stock differently: packaged goods with a ready market are easier to lend against than custom or perishable items. Repayment either follows sales, with the business paying down the balance as units sell, or follows a fixed schedule regardless of sales.
Partners usually want to see how fast your stock turns, how you track it, and your sales history for the categories being financed.
Who uses it in Mesa County
Retail trade had 587 employer establishments in Mesa County in 2023, second only to construction, and 8,957 paid employees (U.S. Census Bureau, County Business Patterns 2023). Wholesale trade had another 218 employer establishments. Retail also counted 1,041 businesses with no paid employees in 2024 (U.S. Census Bureau, Nonemployer Statistics 2024), from one-person online shops to market vendors. Different programmes and years, so the counts should not be added together.
Typical requests come from shops stocking up before a busier stretch, distributors taking a large supplier order to secure a better unit price, and businesses adding a product line.
Collateral and UCC filings
Lenders almost always record their claim on financed inventory by filing a UCC financing statement with the state. In Colorado those filings are searchable through the Secretary of State. A filing that describes "all inventory" can make it hard to finance stock elsewhere until it is released, so ask exactly how the collateral will be described.
Before applying, it helps to know what is already on file against your business. How to search Colorado UCC records explains the search and how to read a filing.
Floor plan financing
Floor plan financing is a form of inventory financing for high-value items that are individually identified, such as vehicles, boats, trailers or large equipment. The lender pays the supplier for each unit, and the dealer repays that unit's advance when it sells. Lenders typically audit the floor regularly to check that every financed unit is still there or has been paid off. It suits dealers with serialized stock more than shops with many small items.
Stock that is harder to finance
Lenders think about what they could recover if they had to sell the inventory, which makes some stock easier to finance than other stock:
- Easier: goods with a broad market and stable prices, tracked by SKU or serial number, stored where they can be counted.
- Harder: perishables, seasonal fashion, custom-made items, and goods held at someone else's premises or on consignment.
- Usually excluded: stock already pledged to another lender, and goods the business does not yet own outright.
Clean records matter as much as the goods. A point-of-sale or inventory system that shows quantities, costs and sell-through by category gives a partner something to underwrite; a spreadsheet updated once a quarter does not.
Questions to ask before financing stock
- How much of the stock's cost will the lender advance, and how is the stock valued?
- Is repayment tied to sales, or fixed regardless of what sells?
- How often will the lender want inventory reports or audits?
- What happens to unsold stock at the end of the term?
- How will the collateral be described in the UCC filing, and when will it be released?
Inventory financing or factoring?
They are often confused but finance different things. Inventory financing lends against goods you have not sold yet. Factoring is the sale of invoices you have already issued: a factor buys your receivables at a discount and collects from your customers. A wholesaler might use both at different points in the cycle, one to buy stock and the other to get paid sooner after delivery.
Inventory financing, a line or working capital?
| Inventory financing | Line of credit | Working capital loan | |
|---|---|---|---|
| Secured by | The inventory | Varies | Often unsecured with a guarantee |
| Use of funds | Stock only | Any business purpose | Operating costs |
| Comes back as | Paid down as goods sell, or scheduled | Payments on the drawn balance | Fixed installments |
If you buy stock regularly in varying amounts, a business line of credit may be simpler.
By Sandland Credit · Updated