Why a business line of credit is perfect for inventory financing

Jun 5, 2025

For product-based businesses - whether you’re running an e-commerce store, a wholesale operation, or a retail outlet - managing inventory is a constant balancing act. Too little stock and you miss out on sales. Too much, and you tie up precious cash. That’s where a business line of credit for inventory financing could be the perfect solution.

A flexible, accessible funding option, a business line of credit helps you buy stock when you need it - without the long-term commitment or inflexibility of a traditional business loan.

In this post, we’ll explore:

What is a business line of credit?
Why use it for inventory financing?
Who is it best for?
Line of credit vs traditional loans
How to use it effectively
How to qualify and apply

What is a business line of credit?

A business line of credit is a type of revolving finance. Think of it like a credit card, but designed for business needs. You’re approved for a certain limit - say, £50,000 - and can draw funds as needed, repay, and reuse.

Unlike a term loan (where you borrow a fixed sum and repay it over time), a line of credit gives you more flexibility to borrow and repay based on your business cash flow and needs.

Why use a line of credit for inventory financing?

Inventory is one of the biggest cash drains for product-based businesses. You often need to purchase stock weeks or months before it sells. And that lag between paying your supplier and receiving payment from customers creates a working capital gap.

Here’s where a business line of credit for inventory financing can make a major difference:

1. Buy inventory in bulk (and save)

Suppliers often offer discounts for bulk purchases. With access to a credit line, you can take advantage of those deals and boost your margins.

At Lenkie, some of our customers use our credit facility to effectively circulate stock multiple times before repayment is due.

E-commerce phone retailer Inc Tablet is a perfect example. The business has a highly in-demand product with a fast turnaround - so founder Adam Hamdoud has been shrewd in using his credit line:

“Using the facility on loop normally provides the most benefit since you get to consistently compound the inventory.

“Since starting with Lenkie, we were running at £400,000-£800,000 sales and we are now on par to reach £2.4m in sales.”

2. Manage seasonality smoothly

If your business sees spikes around certain times of year, a credit line allows you to stock up in advance - without straining your cash flow.

3. Avoid running out of stock and missed sales

Running out of inventory during peak demand can be disastrous. A line of credit ensures you can replenish quickly and meet customer demand.

4. Improve cash flow predictability

Use credit to smooth cash gaps - especially if you’re growing fast or dealing with long payment terms from customers.

Who should consider this financing option?

A business line of credit for inventory financing works best for:

E-commerce brands scaling quickly and dealing with supply chain delays
Retailers preparing for peak seasons or new store launches
Wholesalers and distributors buying in bulk from overseas suppliers
Manufacturers needing raw materials upfront

Essentially though, any business that needs to buy stock before getting paid can benefit. And unfortunately long payment terms affect nearly every business.

How is it different from a traditional loan?

Feature	Business line of credit	Traditional business loan
Flexibility	Draw as needed, repay and reuse	Lump sum with fixed term
Interest/fees	Only pay for what you use	Interest on full amount
Best for	Ongoing cash flow gaps	One-off large expenses
Speed	Often quicker approval	Typically slower

A business line of credit is more agile - which is ideal for the dynamic nature of inventory needs. At Lenkie, flexibility and optionality is a key part of our proposition, you only ever pay for what you use - there are no set up fees or monthly facility charges.

Tips for using your line of credit effectively

Getting approved for a facility is just step one. To make the most of your credit line:

✅ Plan purchases strategically

Use your credit for high-ROI inventory purchases - such as items with fast turnover or strong margins.

✅ Track stock and sales closely

Use inventory management tools to understand what’s selling, how fast, and when to reorder - so you don’t overextend.

✅ Repay promptly to reuse funds

The faster you repay, the sooner you can reuse the funds - especially helpful if your credit line has a limit that you’ll tap into regularly.

✅ Align with your marketing and sales plans

If you're launching a new product or running a promotion, a credit line can help fund inventory to meet expected demand.

Why inventory-backed businesses are turning to credit lines

Inventory financing used to mean inflexible loans or expensive short-term borrowing. But today, more UK business owners are turning to lines of credit for the right mix of control, speed, and scalability.

By using a line of credit to finance inventory, you keep your cash flowing, avoid missed sales, and stay agile in a changing market. And as your business grows, your limit can grow too.

How to qualify for a business line of credit

At Lenkie, you need to:

Be registered as a limited company
Have been trading at least 18 months
Have £1m+ annual revenue based on your latest filed accounts

We also need to look at your latest management accounts, your business bank statements and your credit score.

Our product is flexible though so it’s always worth applying. With a few quick details we can give you an instant pre-qualified offer, and if we can’t help we should be able to refer you to a lender who can.