Inventory financing funds the purchase of goods for resale, typically secured by the inventory itself. Frostspring Business Loans, a small-business funding broker in Dothan, Alabama, explains how it works, floor plan financing, how it differs from factoring and a line of credit, and the records partners want, with Houston County, AL retail figures. Partners alone decide, and they set the terms.
| Pays for | Goods bought for resale |
|---|---|
| Secured by | Usually the inventory itself |
| Houston County, AL retail | 543 payroll employers (2023, CBP) |
| Wholesale | 159 payroll employers (2023, CBP) |
| Who decides | A lending partner; Frostspring is a broker |
Retail and Wholesale in Houston County, AL
Retail trade had more employer establishments than any other sector in Houston County, Alabama in 2023: 543, employing 7,696 people, with 213 of those locations (39.2 percent) under five employees. Wholesale added 159 establishments (U.S. Census Bureau, County Business Patterns 2023). In ZIP 36301 alone, retail accounted for 183 of 948 employers (U.S. Census Bureau, ZIP Code Business Patterns 2023).
A further 692 county retailers had no paid staff in 2024 (U.S. Census Bureau, Nonemployer Statistics 2024). For every one of them, stock is bought before it is sold, and that gap is what inventory financing addresses.
How Inventory Financing Works
- You identify the goods and the supplier invoice.
- A partner advances part of the cost, often paying the supplier directly.
- The inventory secures the financing, usually through a lien the partner files.
- You repay on a schedule or as the stock sells, depending on the agreement.
The advance is usually less than the full invoice, because partners value stock at what it would fetch if they had to sell it, not at retail price.
Floor Plan Financing, Defined
Floor plan financing is a form of inventory financing for high-value items each identified by a serial number, such as vehicles, boats or large equipment held for sale. Each unit is financed separately and paid off when that unit sells. Partners usually audit the floor to check that unsold units are still there.
Inventory Financing Versus Factoring
Inventory financing borrows against stock still waiting for a buyer. Factoring sells invoices for goods or services already delivered, so the factor collects from your customer. A wholesaler with slow-paying trade customers might look at factoring; a shop that sells to the public at the register has no invoices to factor and looks at inventory financing or a line.
The UCC Filing That Comes With Secured Stock
Secured financing usually comes with a UCC financing statement, a public notice that the partner has a claim on the named collateral. It can affect later borrowing, because the next partner will see it. Ask exactly what collateral a filing describes: just this stock, or all business assets.
Seasonal Buying Without Seasonal Claims
Some shops buy heavily ahead of particular months; others restock steadily all year. Partners do not need a story about the calendar, they need your own numbers: last year's purchases by month and how quickly that stock sold. Twelve months of supplier invoices beside twelve months of bank deposits shows the pattern better than any description.
If the pattern is steady, a revolving line usually serves. If it is lumpy, with one or two large orders a year, financing those orders individually can be cleaner.
Before You Apply
- Supplier invoices or quotes for the goods
- Recent bank statements
- An inventory report showing what is on hand
- Sell-through or turnover figures, if you track them
- The business's state sales tax account details
Partners commonly check that a retailer's state sales tax account is in order; the Alabama sales tax license guide explains why. To work out turnover, see how Dothan, AL retailers calculate inventory turnover.
Stock Funding, a Revolving Line or a Lump Sum?
If you restock constantly, a revolving line of credit may be simpler than financing each order. If the purchase is a one-off, such as stocking a new store, inventory financing or a term loan fits. The comparison page sets all six side by side, funding by sector shows how retail compares with other partner sectors, and the four steps cover what follows. County figures sit on the Houston County, AL page.
By Frostspring Business Loans · Updated
