A director's guide to financing stock and inventory

Why stock is a cash trap

Every pound of stock on your shelves is a pound of cash you've already spent and can't use until the stock sells and the customer pays. For a stock-heavy business, that can be a huge slice of your working capital sitting idle. The faster your stock turnover, the less is trapped — but some level of stock is unavoidable, and it always costs cash to hold.

The buy-to-sale gap

The core problem is timing: you pay suppliers for stock before your customers pay you for the finished sale. That gap — part of your cash conversion cycle — is what stock finance bridges. Buying ahead for a busy season or a big order widens it further, precisely when you can least afford to tie up cash. See managing seasonal cash flow.

Ways to fund it

Several tools ease the stock gap. A working-capital facility or revolving credit flexes with your buying cycle. Supplier trade credit, used fairly, delays payment. And once stock becomes sales, invoice finance unlocks the resulting invoices early. The aim is to match the funding to the shape of your stock cycle.

Don't over-stock on borrowed money

Funding stock is sensible; over-stocking on borrowed money is not. Hold too much and you pay to finance inventory that sits, gathering dust and cost. Buy against real, evidenced demand — a confirmed order, a proven seasonal pattern — not hope. The discipline of borrowing to fund stock keeps your buying honest. Size it with the working capital calculator.

Keep it on the company

Stock finance is company working capital, and it should sit on the business. Credicorp lends to the company, not to you personally, and takes no personal guarantee, so funding the stock you need to trade doesn't stake your home. See working capital management.