Inventory Funding With a Merchant Cash Advance
Inventory funding that sells through before the term ends.
Who should read this: retailers, distributors and online sellers buying stock ahead of demand.
How do you match the advance term to sell-through?
You match them by estimating how many weeks the new inventory takes to sell and comparing that with the estimated term of the advance. If a seasonal buy sells over ten weeks and the offer collects over twenty-six, the back half of the term is paid from ordinary sales. That can work. If the stock takes a year to clear, the advance is financing dead weight.
A stock order that bridges a slow month is closer to Cash flow, and stocking a new location is part of Expansion. See Every use we cover for the rest.
We ask owners for last season's sell-through on similar stock. A past number beats a hopeful one.
We're not a funder.
We don't fund deals ourselves. We shop yours with funders who do, so you see more than one offer.
Only funders that fit.
Your file goes to funders that work with your industry and your deal size. Nobody else sees it.
You make the call.
Every offer comes to you in writing. Nothing happens until you pick one.
- What it costs to apply
- Nothing. Applying costs you nothing, and Afterfirst MCA charges you no fee.
- Credit
- Ask us how each funder checks credit before you agree to anything.
- Speed
- We call you back and talk with you before your file goes to any funder.
- Offers
- Every offer shows the total payback, the payment amount, how often it comes out, and the term.
Estimating sell-through before inventory funding
You estimate sell-through from how long similar stock took to sell in past seasons, adjusted for the size of the new order. Past sales records beat a guess.
Last season's sales for the same lines
Look up the sales for the same product lines during the same months last year. Divide the new order by that pace to get weeks to sell through.
A product line with no history
A new line has no history, so the estimate is weaker. Funders and owners alike should treat the payback timing as uncertain.
A smaller first order
Buying a smaller first order of a new line limits how much of the advance rides on it. The rest can follow once sales show a pace.
Four weeks of hoped-for sales
An owner testing a new line might fund a first order sized to four weeks of hoped-for sales. If it sells, the reorder is paid from those sales.
Supplier minimums that force a larger buy
Some suppliers set minimum order sizes above what the owner would choose. Compare the minimum with the sell-through pace before letting it set the advance size.
What changes when the supplier offers terms?
Supplier terms change the math because they are often cheaper than any advance. Net-30 or net-60 from a vendor costs nothing inside that window. An advance makes sense for inventory when the supplier wants cash up front, offers a discount for paying now that outweighs the advance cost, or when the order is too big for the credit line.
The Holdback guide explains how a split remittance tracks sell-through, and How a merchant cash advance works covers purchase price and purchased amount.
| Source | When it fits inventory |
|---|---|
| Supplier terms | Vendor extends credit; no cost within the terms |
| Business line of credit | Recurring purchases, draws repaid as goods sell |
| Merchant cash advance | Cash needed now, sell-through shorter than the term |
| Inventory financing | Larger orders secured by the goods themselves |
How the purchase reads on the statement
A funder will notice a large supplier payment right after funding and will look at whether the deposits rise afterward. Funders also watch for a dip in sales while the business waits on delivery. A note explaining the order and its season helps your file read correctly.
Stock and sell-through
Is a merchant cash advance cheaper than supplier financing for inventory?
A merchant cash advance is usually more expensive than supplier credit within its payment window. It can come out ahead when a supplier's early-payment discount is large enough to offset the advance cost. Compare both in dollars before choosing.
What if the inventory doesn't sell as planned?
The remittance continues on schedule regardless of sell-through. If sales actually drop, the reconciliation clause lets the business request an adjusted debit based on receivables. Slow-moving stock alone doesn't change the obligation.
Can an ecommerce seller use an advance for inventory?
Yes, online sellers commonly use advances for inventory, and some platforms offer their own financing. Platform financing often takes a share of payouts, which already reduces cash coming in. Tell the funder about any platform financing so it's counted.
Sources
- The SBA's Fund your business guide suggests stating how much funding you need and what it's for; for inventory funding, that means the order size and the expected sell-through.
Afterfirst is not a funder; all offers are subject to funder underwriting.
Cost, credit, speed and stacking
Cost
Credit
Speed
Stacking
Send one file.
See what fits.
Call 877-FUND-654 with questions.