The main ways brands finance stock, described neutrally, and one way to compare them all. Arrange it before you need it.
Sometimes a shorter cycle and customer funding aren’t enough: a seasonal build, a big retail order, a plan the tool in chapter 2 says your cash can’t fund. This chapter describes the main options without recommending any; the right one depends on your business, and an adviser who knows it should help you choose. None of this is financial advice.
| Option | How it works | The cost shows up as | Watch for |
|---|---|---|---|
| Bank line of credit | A limit you draw and repay as needed, often secured on the business’s assets | Interest on what you draw, sometimes a fee on what you don’t | Personal guarantees, covenants, annual renewal |
| Asset-based line | A line sized to a share of eligible inventory and receivables, recalculated regularly | Interest plus monitoring fees | Regular reporting on stock and sales; the limit shrinks when stock does |
| Inventory or purchase order financing | A funder pays the supplier for one order and is repaid as the goods sell | A fee per order or per month | The fee as an annual rate; rights over the goods |
| Revenue-based financing or merchant cash advance | A lump sum repaid as a share of daily sales, with a fixed fee | The fixed fee | The fee’s real annual rate, which rises the faster you repay |
| Supplier terms | Chapter 11 | Usually nothing, or a lost early-payment discount | Relationship cost if you stretch without agreement |
| Equity | Selling part of the company | Ownership, forever | The most expensive money if the business succeeds |
Shopify Capital is a common example of the sales-linked kind. Shopify describes it as offering “merchant cash advances and loans,” repaid with “a fixed percentage of your store’s daily sales, but only on days you make sales,” with “no compounding interest”; loans in the US are issued by WebBank Reported. Repayments fall when sales fall, which is a real convenience. The fee still has an annual rate.
Put every option into two numbers: the total dollars you’ll pay beyond what you borrow, and that cost as an annual rate, given how quickly you’ll repay. A fixed fee looks small until you annualize it.
Say you take $100,000 with a $10,000 fee, repaid in equal monthly amounts over six months. Your average balance is a little under $60,000, for half a year, so the $10,000 is roughly 34% a year. Repay the same fee over three months, because sales went well, and it’s about 59% Derived. That doesn’t make it wrong; money that funds a sold-out launch can be worth 59%. Know the number before you sign.
Every fee has an annual rate. Work it out before you sign, not after.
Arrange a line of credit when your forecast says you won’t need it: terms are better and you have time to compare. A brand that arranges financing in the week it runs short takes whatever is offered. The 13-week forecast in the next chapter is also the first thing a good lender will ask to see.
This is one chapter of Cash Before Growth, which is free and readable in full on a single page with no form in front of it.