How to Finance Inventory Before a Busy Season (NZ)
The main ways to fund stock before a busy season are longer terms from your own suppliers, a business overdraft, an inventory or trade finance facility, a short-term loan, customer deposits, and getting paid upfront when customers pay in instalments. The cheapest is usually supplier credit. The right mix depends on how long the gap lasts and how big it is.
Why Upfront Stock Costs Create a Cash Flow Gap
Before a busy season you pay for stock weeks or months before it sells, and then wait again for customers to pay. That gap is your cash conversion cycle, and peak season stretches it at the same time it multiplies the amount involved. For the patterns by sector, see seasonal cash flow strategies for NZ wholesalers.
Before choosing how to fund it, work out two numbers: how much you need at the lowest point, and for how long. A $50,000 gap for six weeks needs a very different answer from a $400,000 gap for five months.
Financing Options Compared
| Option | How it works | Typical cost | Best for | Watch out for |
|---|---|---|---|---|
| Longer supplier terms | Your supplier gives you more time to pay for a pre-season order | Usually free if paid on time | Regular suppliers who know your record | Paying late costs you the account |
| Business overdraft or credit line | Draw down as needed, repay as cash comes in | Interest on the amount used, plus fees | Short, uneven gaps | Often needs property or a director's guarantee as security |
| Inventory or trade finance | A lender pays your supplier and you repay over an agreed term | Interest and fees, often higher than an overdraft | Large or imported orders | Usually secured over stock, with a security interest registered on the PPSR |
| Short-term business loan | Lump sum repaid in fixed instalments | Interest, fixed for the term | A one-off, predictable stock purchase | Repayments continue even if sales are slow |
| Customer deposits or pre-orders | Retailers pay part of the order upfront | Free, but can cost you some orders | Popular lines with confirmed demand | Not every customer will accept it |
| Instalments for your own customers | Customers pay over time; a provider pays you in full upfront | A merchant fee per invoice | Large orders from trade customers | Only applies to approved customers and eligible invoices |
For a deeper look at the first option, see what trade credit is. For how lending and invoice-based finance differ, see trade credit vs a business loan and trade credit vs invoice finance.
Working Out What Borrowing Actually Costs
For interest-based options, the quick calculation is: amount × annual rate × days borrowed ÷ 365, plus any setup or line fees.
Example (illustrative figures): a Nelson outdoor gear wholesaler needs $120,000 of summer stock in September and expects to have been paid for most of it by mid December, about 90 days later. At an illustrative 12% a year, that's $120,000 × 0.12 × 90 ÷ 365 = about $3,550 in interest, before fees.
Compare that with what each option costs in total, not just the headline rate. A facility with a lower rate but a large setup fee can cost more for a short gap than a slightly dearer overdraft.
How Offering Instalments to Your Customers Speeds Up the Cycle
Most of the options above fund the buying side: they help you pay for stock and then wait. Instalments work on the selling side. When a retailer pays a large order in instalments through a provider that pays you the full invoice upfront, you aren't waiting until the 20th of the month following, or longer, for that money.
In the Nelson example, if $60,000 of the October orders were paid upfront this way, the wholesaler would need to fund that half of the stock for a few weeks rather than three months. Retailers also tend to order the full quantity they need when they can spread the cost, rather than ordering short and reordering mid-season.
In practice most businesses use two or three of these together: supplier terms and an overdraft for everyday stock, plus instalments or deposits on the biggest orders. See the Cash Flow guide for the rest of the picture. If you're the retailer or trade customer buying the stock, the Stock Finance guide covers the same question from your side.
Frequently Asked Questions
What is inventory financing?
Inventory financing is a loan or facility used to buy stock, usually secured over that stock. The lender often pays your supplier directly and you repay over an agreed term, typically once the stock has sold and customers have paid.
What is the cheapest way to finance stock?
Usually credit from your own suppliers, because it costs nothing if you pay by the due date. After that, an overdraft is often cheaper than specialist inventory finance for short gaps, but compare total cost including fees, not just the interest rate.
Do I need security to finance inventory in NZ?
Often, yes. Lenders commonly ask for a general security agreement over the business, registered on the Personal Property Securities Register, and sometimes a director's personal guarantee. Read the security terms before signing.
How far ahead should I arrange funding for peak season?
At least two to three months before you place the stock order. Approval can take weeks, and lenders are easier to deal with when you aren't under time pressure.
Can offering instalments to customers really help fund my stock?
It doesn't pay for stock directly, but it shortens the time until you're paid for it. If a provider pays you upfront on a large order, that cash arrives weeks or months earlier and can fund the next order.
