Inventory financing comes in several types, from a one-time stock loan to a revolving line, floor plan financing and purchase order funding. Orchardmark Financial, a small-business funding broker in Scranton, Pennsylvania, explains which type suits which kind of Lackawanna County retailer and what partners review. Each credit decision, rate and term belongs to the lending partner.
Retail in Lackawanna County, PA
Retail trade had 809 employer establishments in Lackawanna County in 2023, second only to health care, with 11,867 paid employees; 373 of those stores had fewer than five employees (U.S. Census Bureau, County Business Patterns 2023). Another 1,199 retailers ran with no paid employees in 2024 (U.S. Census Bureau, Nonemployer Statistics 2024). Retail leads the employer counts in several nearby ZIPs, including 18507 around Moosic with 46 stores and 18447 around Olyphant with 41 (U.S. Census Bureau, ZIP Code Business Patterns 2023).
Most of those stores are small enough that one large stock order matters, which is when the type of inventory financing makes a difference.
Type 1: an inventory loan for one purchase
A fixed amount for a defined purchase, repaid on a schedule and secured by the goods. It suits a store making one large buy, such as stocking a new product line or a bulk order at a supplier discount. The partner usually advances only part of the stock's value, depending on how easily it could be resold.
Type 2: a revolving inventory line
A limit the store draws on as it restocks, repaying as goods sell, often with the inventory as collateral and regular reports on stock levels. It suits a store that buys every week or month in varying amounts. A general business line of credit works the same way without being tied to inventory reports, and is sometimes simpler for a small shop.
Type 3: floor plan financing
For high-value units sold one at a time and tracked by serial number, such as vehicles, boats, large appliances or equipment on a dealer's floor. Each unit is financed when it arrives and paid off when it sells, and the partner checks the stock periodically. It suits dealers, not general retailers.
Type 4: purchase order financing
For a business with a confirmed customer order it cannot afford to fill. A funder pays the supplier, the goods ship to the customer, and the funder is repaid when the customer pays. It suits a wholesaler or a store with a large institutional order, and it depends heavily on the customer's credit, not just the store's.
What is not inventory financing
Supplier payment terms, such as net 30, are trade credit from the supplier, not financing a partner provides, and they are often the cheapest option when available. A merchant cash advance is not inventory financing and is not a loan; it buys a share of future sales and collects from them whatever the stock does.
An inventory financing example
A hypothetical, to show the mechanics only. A store places a stock order costing amount S. The partner advances part of S, and the store pays the rest from its own cash. Over the next months, the store repays on a schedule while it sells the goods. If the goods sell as planned, the sales cover the payments with margin to spare; if they sell slowly, the payments continue and the store covers them from other income. The question to answer before signing is how long the stock really takes to sell, not how long you hope it will.
What partners check for each type
- Sales history by product line, ideally from the point-of-sale system.
- How long stock takes to sell, and how much is slow-moving.
- Where the stock is kept and what insurance covers it.
- Existing liens on business assets.
- Sales tax filings, which give an independent record of taxable sales.
The last item is covered in the Pennsylvania sales tax license guide. For the structure in full, see how inventory financing works, and for more articles, the Orchardmark blog.
By Orchardmark Financial · Updated
