Releasing capital tied up in stock sitting on your shelves.
What it does
Stock finance lends against inventory you hold. For a distributor carrying substantial stock as a matter of course, that is often one of the largest items on the balance sheet and one of the least productive.
It sits between trade finance, which funds the purchase, and invoice finance, which funds the sale. Together the three can cover the working capital cycle from supplier payment to customer receipt.
Where it fits
- Distributors required to hold buffer stock under a supply agreement
- Seasonal build ahead of a peak, such as flu vaccine or winter demand
- Buying opportunities where a volume discount justifies holding more
- Businesses whose customers expect next-day availability from held stock
- Bridging the period between a large purchase and the orders that consume it
If you run a pharmacy rather than a distributor, stock pressure is usually better handled through pharmacy working capital facilities.
What makes stock fundable
Funders assess how readily the stock could be sold if they had to realise it. That means:
- Identifiability. Can it be located, counted and separated from stock financed elsewhere?
- Marketability. Is there a ready market beyond your own customer base?
- Shelf life. Dated pharmaceutical stock is a weaker security position than durable equipment.
- Storage. Cold chain and controlled storage requirements narrow the funder pool.
- Stock control. Accurate, current, auditable records. This is often the deciding factor.
Stock records are the gate
Stock finance applications often fall down on record-keeping rather than on the stock itself. A funder lending against inventory needs to believe the numbers, which usually means a stock system that reconciles, regular counts, and a clear audit trail.
If your stock control is spreadsheet-based and reconciled annually, it is better to fix that before applying than after being declined. It is also worth doing for its own sake.
Realistic expectations
Advance rates against stock are usually considerably lower than against invoices. An invoice is a debt owed by a creditworthy customer; stock is goods that might have to be sold at a discount in a hurry. Expect that to be reflected in the terms.
Stock finance is usually most valuable as part of a combined facility rather than standing alone. Asset-based lenders who can look at debtors, stock and equipment together can often give a better overall result than three separate arrangements.
Common questions
Can dated pharmaceutical stock be funded?
It can, though the dating affects the advance rate and the funder pool. Stock with a long remaining shelf life is more straightforward; short-dated stock much less so.
Does cold chain storage cause problems?
It narrows the field. Funders need confidence that storage conditions are maintained and monitored, because the stock may lose most or all of its value if they are not.
Is this better than a bigger overdraft?
For structural stock holding, it often is. An overdraft is usually repayable on demand and can be reduced at review when you most need it. A committed stock facility runs for an agreed term, subject to its terms and covenants, which gives more certainty.
For the wider picture on funding distributors, return to medical wholesaler finance, or see our general guide to working capital.
All figures are indicative and subject to lender assessment, your circumstances, valuation and prevailing market conditions. Commercial mortgages and unregulated bridging loans are not regulated by the Financial Conduct Authority. Property offered as security may be at risk if you do not keep up repayments.