Knowledge base · Inventory financing · 5 minuten · 31 Jul 2026
Inventory finance: how do you free up capital from your stock?
A large share of your working capital can sit locked in stock: capital you have already spent, standing still until the stock is sold. Inventory finance frees that money up, without you having to run your stock down. This article covers how it works and who it suits.
Capital standing still
In trading and manufacturing businesses a sizeable share of working capital often sits locked in stock. Raw materials, work in progress or trading stock that you have bought in, but that has not yet turned into revenue.
That capital stands still. You have spent it, but you can do nothing with it until the stock is sold and paid for. With steady turnaround that is manageable. With growth, seasonal peaks or large purchases, though, that idle value can mount up considerably, at exactly the moment you need liquidity to buy the next batch.
What inventory finance does
Inventory finance frees up the capital locked in your stock, without you having to run that stock down. Your stock position stays intact, but you gain access to part of its value.
The financier works out the fundable value of your stock together with you. On that basis an advance rate is agreed: the share of the value you can draw as working capital. That rate is set in advance, so you know exactly where you stand.
How it works in practice
Inventory finance calls for visibility of your stock. In practice you submit a stock list periodically, from which the financier can follow the current position. That is not a daily administrative burden, but a periodic submission.
On the basis of those lists your funding headroom moves with your stock value. Buy in for a peak and the headroom grows. Sell the stock down and the advance reduces again. That way the finance follows the natural rhythm of your business.
Who it works for
Inventory finance suits businesses with substantial, readily saleable stock. Think of wholesale and distribution and of manufacturing and industry. Where seasonal patterns or swings in raw material prices come into play, it offers real breathing space: you can buy at the right moment, without your liquidity seizing up.
SOOF Finance works with SMEs.
Stronger in combination
Inventory finance rarely stands on its own. In many businesses the working capital is locked in two places at once: in the stock and in unpaid invoices. The combination with factoring is then stronger than either one on its own. Inventory finance frees up capital on the buying side, factoring on the selling side.
One point to watch: if your stock is already pledged to the bank, inventory finance can only follow once that pledge has been taken over. That too can be resolved, provided the process is coordinated carefully.
What it comes down to
Inventory finance frees up the capital locked in your stock, without running it down. It suits businesses with substantial stock and a working capital need that moves with buying and season. It often works best alongside factoring, so that both sides of your working capital start working.
About the author
Jaap van Aalst
Commercieel directeur, SOOF Finance
Jaap van Aalst started his first business almost thirty years ago, in staffing and secondment. That is where he saw for himself how many opportunities are lost when money sits too long in unpaid invoices.
Around eighteen years ago he moved into the factoring world, as commercial director. Since then he has sat across the table from countless business owners and seen at first hand what financing questions look like in practice. He looks further than the balance sheet: what the business does, where the opportunities are, and which form of finance genuinely moves it forward.
That is also the basis of his work at SOOF Finance. His starting point is simple: finance is not an end in itself, but a means by which a good entrepreneur delivers on their plans.
Frequently asked questions
No. The stock position stays as it is. Only the capital locked inside it is freed up.
Yes. Those are exactly the moments when a lot of capital sits in stock while the sales are still to come.
Yes. Stock and receivables are two consecutive stages of the same cycle. How that combination works is set out in inventory finance in practice.
Further reading: the biggest pitfalls in factoring
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