The Playbook: How to Finance Inventory Without Killing Your Margins

Your base inventory is what you need to keep the lights on – roughly 6-8 weeks of stock. More if you're a subscription.

Best ways to fund it:

• Bank Term Loans: NAB or Westpac offer 5-year loans at ~12.95% interest. If you’ve got solid financials, this is the cheapest money you’ll get.

• Retained Earnings: Boring, but free. If you’ve got the cash, reinvest profits and take advantage of instant asset write-offs under $20k.

• Trade Credit: Negotiate net-60 payment terms with suppliers. If they won’t budge, find ones who will.

Smooth Out Seasonal Fluctuations (Without Getting Rekt)

Your sales aren’t steady. School holidays, EOFY, and Black Friday can boost sales by 30-50% overnight. You need flexible financing.

Best tools:

• Lines of Credit (LOCs): ANZ Business Overdraft (up to $500k) or Tyro’s revenue-based lending. Draw what you need, when you need it.

• Supplier Payment Plans: Some suppliers will stagger payments over 3-6 months if you order big.

• Best Practice: Repay within 90 days to avoid compounding interest. Hook up MYOB/Xero to track cash flow in real-time.

Data Point: 68% of Australian SMEs use LOCs for inventory. But beware – average rates sit at 17% p.a.

Emergency Funding for Big Inventory Purchases

When you get an opportunity (or crisis), you need fast capital. But don’t let “quick money” kill your margins.

Options:

• Shopify Capital (Australia): 3-6 month advances, 10-17% fixed fees (repaid daily from sales). Super fast, but not always transparent.

• Prospa/Moula Loans: Up to $500k, but interest rates can hit 12-30%.

• Peer-to-Peer Lending: Platforms like MoneyPlace can offer 12-20% rates. Slower approval but better terms than fintech lenders.

Use these only for short-term needs (e.g., supplier bankruptcy, stockouts).

Real-World Example: How a Sydney Skincare Brand Saved 32% on Financing

Here’s what they did:

• Took a $200k NAB term loan at 11% p.a. to fund base inventory.

• Used a $50k Tyro LOC for seasonal stock.

• Avoided Clearco’s 17% cut by negotiating better PayPal Working Capital terms.

Result: They cut $31k in annual interest costs while keeping an 8-week stock buffer.

What to Do Next

1. Audit Your Inventory Cycles: Understand your seasonal peaks and minimum levels.

2. Secure Long-Term Debt: Apply for a Business Fixed Loan (you’ll need 10-20% down).

3. Set Up a LOC: If you’ve got 6+ months of revenue, Try Moula or ScotPac

4. Pre-Qualify Alternative Lenders: If things go south, be ready with pre-approved Shopify Capital or Prospa loans.