Knowledge base · Industry knowledge · 6 minuten · 31 Jul 2026

Factoring, inventory finance or a business loan: which fits you?

Factoring, inventory finance or a business loan: which suits your business? The most useful question is not which product is best, but where your capital is stuck. This article runs through all three, with when each one fits and how they work together.

A man in a doorway looking down a long machine hall

Start with the right question

The choice between factoring, inventory finance and a business loan is often presented as a product comparison. That is not how it works in practice. Two questions get you further: where is your capital stuck, and is your security free to use?

Answer those two, and the choice becomes a good deal clearer. Below we run through the three forms.

Factoring: capital out of your receivables

Factoring fits when your money is stuck in unpaid invoices. You deliver a product or a service, send an invoice, and wait 30 to 90 days for payment. Factoring turns those unpaid invoices into working capital straight away.

The funding line grows with your turnover, with no fixed ceiling. That makes it strong for growth, seasonal peaks and long payment terms. Typical sectors: transport, staffing, international trade and construction.

Choose factoring when your working capital need sits mainly on the receivables side and moves with your invoicing.

Inventory finance: capital out of your stock

If your money sits in stock rather than in invoices, inventory finance is the logical route. It frees up capital locked in raw materials, work in progress or trading stock, without you having to run that stock down.

This suits wholesale and distribution and manufacturing and industry, above all where season or swings in raw material prices come into play. The finance moves with your stock value.

Choose inventory finance when a substantial share of your capital is locked in stock.

Business loan: prising a stuck situation loose

A business loan is not a day-to-day working capital solution. It is an instrument for breaking a stuck situation open. The classic case: the bank will not go further and at the same time holds on to all your security.

With a business loan you buy out that bank position, which releases your pledges. Often that is the step that makes factoring or inventory finance possible at all.

Choose a business loan when your security is jammed and you need a restructuring or a buy-out to get headroom again.

It is often a combination

In practice these forms rarely stand on their own. A trading business has capital locked in both stock and receivables, and then combines inventory finance with factoring. A construction firm whose security sits with the bank first uses a business loan to buy that out, and then puts factoring to work on the project invoices.

The advantage of one party offering all three is that the combination fits together. One point of contact and one overview for all your working capital.

What it comes down to

The choice depends on where your capital is stuck. If it sits in receivables, factoring. If it sits in stock, inventory finance. If your security is jammed at the bank, a business loan to prise it loose. And often the strongest answer is a combination, matched to your situation.

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.

Ask your question

Frequently asked questions

No. Start with your bottleneck, not with the product. If you want to know quickly, take the quickscan.

Yes. SOOF Finance combines factoring, inventory finance and a business loan through one party.

Then that is the first thing to resolve. Read how that works in what is a pledge.