Borrowing against inventory?

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March 15, 2026

by a searcher from University of Oklahoma - Michael F. Price College of Business in Oklahoma City, OK, USA

Anyone have experience using inventory-backed loans for working capital? I'd love to hear how it went, pros/cons, and recommendations for lenders that work well with small main street businesses. Thanks!
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Reply by a professional-advisory
from University of Alabama in Baltimore, MD, USA
Inventory-backed loans are not what I'd recommend, unless you absolutely have no choice. I've always had a LOC, tied to my signature, or some other asset. Never my inventory. If the market drops and your lender gets nervous, they can do an 'reassessment' and if they determine the 'value' is lower in the current market, they can force you to generate the difference in cash. I've seen it happen. Another option is Factoring.
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Reply by a professional
from The University of Georgia in Atlanta, GA, USA
It's a pretty standard asset backed lending (ABL )practice for working capital, just need to ensure the inventory is accurate and you have good controls around the accounting of inventory (ins and outs). If you don't have good controls around inventory you can get upside down quickly!
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