Ecommerce Inventory Financing NZ: How Online Brands Fund More Stock
NZ online stores fund inventory mainly through supplier terms and deposits, then trade finance for imported stock, revenue-based finance repaid from sales, pre-orders, short-term loans, and instalments on invoices from NZ suppliers. Because online brands often pay for a production run months before it sells, the funding has to last the whole cycle, not just until the stock arrives.
Why Inventory Is Harder to Fund for Online Brands
- You pay twice before you sell. Manufacturers commonly want a deposit when you order and the balance before goods ship or leave the factory. Packaging is often a separate order with its own minimums.
- The cycle is long. Production, freight and the sell-through period can add up to five or six months between paying the deposit and selling the last unit.
- There's not much to lend against. A small online brand may have no property, few business customers owing it money, and stock that a bank values cautiously.
- Imports add costs at the border. GST and any duty are payable when goods are imported. GST-registered businesses claim the GST back in their return, but they pay it first.
Worked Example: A Skincare Production Run
Illustrative figures: an Auckland skincare brand selling through its own online store orders a $30,000 (excluding GST) production run from an NZ contract manufacturer. It also orders $9,000 of bottles and cartons from an NZ packaging supplier. The manufacturer wants 50% on order and 50% on completion. The brand expects to sell the stock over four months.
| Month | Cash out | Cash in from sales (at cost) | Running gap |
|---|---|---|---|
| Month 0 | $15,000 deposit + $9,000 packaging | $0 | $24,000 |
| Month 2 | $15,000 balance on completion | $0 | $39,000 |
| Month 3 | None | $10,000 | $29,000 |
| Month 6 | None | $39,000 in total | $0 |
At its peak the brand has $39,000 tied up, and it stays tied up for most of six months. That's before marketing spend to sell the stock. A 30-day solution leaves the gap unfunded at exactly the point the brand needs to spend on ads.
Ecommerce Inventory Financing Options
| Option | How it works | Best for | Watch out for |
|---|---|---|---|
| Supplier terms and deposits | Negotiate a smaller deposit, or 30 days after delivery | An established manufacturer relationship | New brands rarely get terms on the first run |
| Trade finance for imports | A bank or lender pays an overseas supplier against your purchase order and shipping documents | Larger, regular import orders | Minimum sizes, documents and setup time |
| Revenue-based finance | An advance repaid as a share of your online sales | Brands with steady, trackable revenue | The total cost can be high if sales are slower than expected |
| Pre-orders | Customers pay before the run is made | Launches and restocks of proven products | Delivery delays hurt reviews and refunds |
| Short-term loan or overdraft | Traditional lending | Brands with trading history and security | Banks may lend cautiously against online-only stock |
| Instalments on an NZ supplier invoice | A provider pays the NZ supplier, and you repay monthly | Production runs and packaging from NZ suppliers | Subject to approval. Doesn't cover overseas suppliers |
For importers, purchase order and trade finance explains how lenders fund a shipment before it arrives. For the underlying numbers, see the cash conversion cycle.
How Much Stock to Fund
Work it out from weeks of cover: units on hand divided by average weekly sales. If you sell 150 units a week and the lead time from order to stock in your warehouse is 10 weeks, you need at least 1,500 units on hand when you reorder, plus a buffer for promotions. Fund the run size that keeps you in stock through one lead time and the sell-through period. Ordering a bigger run to save a few cents a unit only pays off if the saving beats the extra funding cost and the stock won't date.
Where PaidTerms Fits
PaidTerms is for invoices from NZ businesses, such as your contract manufacturer, packaging supplier, printer or NZ distributor. In the example, the brand could apply with the $15,000 completion invoice, or the packaging invoice. If it's approved, PaidTerms pays the supplier in full and the brand repays over 3, 6 or 9 months, in line with the months the stock is selling. Fees start from 3.95% for three instalments and are shown before you confirm.
It doesn't pay overseas manufacturers, so stock made offshore needs trade finance, supplier terms or another option above. More in the Stock Finance guide, and for bricks-and-mortar ordering see retail stock finance.
Frequently Asked Questions
What is ecommerce inventory financing?
It is any funding an online business uses to pay for stock before it sells. Common forms are supplier terms, trade finance for imports, revenue based advances repaid from sales, loans and instalments on supplier invoices.
How do NZ online stores fund their first production run?
Usually from savings, pre orders or a small loan, because new brands rarely get supplier terms or trade finance for a first order. After one or two runs with a good payment record, manufacturers are more willing to reduce deposits or offer terms.
How do I finance stock I am importing to NZ?
Trade finance from a bank or specialist lender is the usual route for larger orders. It pays the overseas supplier against your purchase order and shipping documents. Remember to budget for freight, duty and GST at the border on top of the supplier invoice.
How can a product brand fund a manufacturing run?
Negotiate the deposit and balance timing with the manufacturer first, then fund the rest with pre orders, a loan, revenue based finance or instalments on the manufacturer's invoice if it is an NZ business. Match the funding term to how long the run takes to sell.
Is revenue based finance a good idea for an online store?
It can be for a store with steady, predictable sales, because repayments rise and fall with revenue. Compare the total amount repayable with other options, since a fixed fee repaid quickly can be expensive as an annual rate.
