# Inventory financing in Canada: borrowing against stock

How businesses borrow to buy stock or against the stock they hold, how much lenders advance on it, and when a line of credit or a term loan does the job better.

Published: 2026-09-26 · Spark

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Inventory is cash sitting on a shelf. For retailers, wholesalers, distributors and manufacturers it is often the largest thing the business owns — and the reason it runs short of cash before a busy season. Inventory financing is borrowing to buy stock, or against the stock you already hold.

## The two versions

**Financing a stock purchase.** A lump sum to buy inventory ahead of a season or a large order, repaid as the stock sells. This is often done with a [term loan](/capital/term-loans) or a [short-term loan](/guides/short-term-business-loans), sized against your deposits rather than against the stock itself.

**Borrowing against stock you hold.** The inventory secures a revolving facility, usually as part of [asset-based lending](/capital/asset-based-lending) alongside your receivables. The limit rises and falls with the value of the stock on hand.

## How much a lender will advance

When inventory is the security, a lender does not lend its full value. It lends a percentage of what the stock would fetch if it had to be sold quickly — which is less than its cost, and much less than its retail price.

What moves that percentage:

- **How easily it sells.** Finished goods with a ready market — building supplies, auto parts, packaged food with a long shelf life — are worth more as security than custom or seasonal items.
- **Shelf life.** Perishable and fashion stock loses value fast.
- **How well it is tracked.** A clean, current inventory listing with costs is the document that decides it.
- **Where it is.** Stock in your own warehouse is simpler than stock spread across third-party locations.

Raw materials and work-in-progress are usually advanced on at much lower rates than finished goods, or not at all, because they are hard to sell as they are.

## What you will be asked for

- An **inventory listing**: what you hold, where, and at what cost
- How quickly it turns — how long an item sits before it sells
- Your usual bank statements and incorporation documents
- For larger facilities, periodic stock counts or reports while the facility is open

## When a different product fits better

**If the need is seasonal and repeats every year,** a [line of credit](/capital/line-of-credit) sized against your revenue can be simpler than a facility tied to stock counts: you draw before the season and pay it down as it sells.

**If the stock is already sold** — you have the order and are waiting to be paid — the value is in the receivable, not the stock. [Invoice factoring](/guides/invoice-factoring) or asset-based lending on receivables is the better fit.

**If you have both receivables and inventory,** an asset-based facility that lends against both usually gives the largest limit at the lowest cost.

## Before you borrow to buy stock

- **Be sure it will sell in time.** Stock that sits past the loan's term means paying for the loan out of something else.
- **Match the term to the turn.** A loan that ends before the stock sells puts pressure on the account; one that runs long after costs more than it needs to.
- **Keep supplier terms.** Paying suppliers early to get a discount is only worth borrowing for if the discount is bigger than the cost of the money.

For how much you could borrow from your deposits, try the [business loan calculator](/business-loan-calculator). For how stock ties up cash in the first place, see [what working capital is](/guides/what-is-working-capital).