Stocking Finance

Last updated: 26/02/2025

Stocking Finance for UK Businesses 

Stocking finance provides UK businesses with a flexible way to purchase and hold stock without straining cash flow. Whether you're a dealer looking to increase inventory or a business managing seasonal demand, this facility offers pre-approved credit lines, competitive terms, and support from trusted lenders.

While stocking finance is a great option, there are alternatives such as a business loan for car dealerships which would provide flexibility for dealers to purchase inventory outright instead of being tied to the number of vehicles sold.

What is Stocking Finance?

A stocking loan, also known as stock funding or unit stocking, is a type of financing specifically designed for businesses that need to purchase inventory, particularly in industries like car dealerships. It allows businesses to acquire stock without tying up their own cash reserves, enabling them to maintain and expand their inventory level.

Additionally stocking finance is a facility given to dealerships relating to its vehicle stock. As opposed to other finance, it is specifically designed for dealerships buying and selling vehicles.

The primary purpose of stock finance is to release cash tied up in stock and increase the number of vehicles on a dealership’s forecourt to increase revenue and profits.

Stocking finance can be in respect of vehicles, cars, vans, lorries, HGVs, trucks, agricultural vehicles, and other vehicles.

Alternatives to stocking finance

A great alternative to stocking finance is an unsecured business loan.

An unsecured loan is a business loan provided solely on the borrower’s creditworthiness, without requiring collateral. It’s ideal for businesses without tangible assets or those needing quick funds.

Unlike stocking finance, which is specifically designed to help businesses purchase and manage stock such as vehicles, an unsecured loan offers greater flexibility, allowing businesses to allocate funds as needed.

Whether it's for purchasing inventory, covering operational costs, or investing in marketing, an unsecured loan provides a lump sum with fixed repayment terms.

Additionally, unsecured loans eliminate the risk of having stock repossessed if sales are slower than expected. Stocking finance often comes with conditions that require stock to be sold within a certain timeframe, which can put pressure on businesses, particularly in fluctuating markets.

Example of stocking finance

A car dealership might use stock funding to purchase a batch of vehicles from an auction or a manufacturer. The funding facility would cover the cost of the vehicles, including any associated fees like auction fees and delivery costs. As the dealership sells the vehicles, they would repay the loan to the funding provider.

The benefits of an unsecured loan over stocking finance

An unsecured loan and a stocking finance facility are two different products, so the benefits of using an unsecured loan over a stocking finance depend on the business's needs.

Here are some advantages of an unsecured business loan:

No Collateral Required - unlike stocking finance, which typically uses stock (such as vehicles) as security, an unsecured loan doesn’t typically require assets as collateral in order to get the business loan.
Greater Flexibility - unsecured loans can be used for any business purpose, not just purchasing stock. This makes them a better option for funding marketing, expansion, or operational costs.
No Ties to Stock Turnover - stocking finance is directly linked to stock purchases and sales. If stock isn’t sold within a specific timeframe, businesses may face pressure to repay.
Easier to Manage - with a stocking finance facility, businesses must track stock levels and sales to manage their facility properly. An unsecured loan is a straightforward lump sum with set repayment terms, making it easier to manage for the business.

Example of alternative finance solution to stocking finance

A used car dealership turned to MAF to replace its existing stocking finance facility with an unsecured loan. The dealership was frustrated with the level of service from its stocking finance provider and sought a £500K unsecured loan to consolidate its financing needs.

By doing so the car dealership were able to streamline their funding into a single loan, allowing them to focus on purchasing new vehicles and improving their profit margins per sale.

With the help of our panel of funders, we split the loan into two £250K unsecured loans, effectively closing their stocking facility. The client was pleased with the outcome, as the unsecured loan provided them with more flexibility and the potential for greater profits in the years to come.

 The process of stocking finance

• Before making an application you should get together a full set of your latest filed financial statements, together with any available up to date MI and your current stocklist.
• As a business owner you will normally be required to offer a personal guarantee so you should also be ready to submit details of your personal financial situation.
• Once you apply, the chosen provider will review all of the information submitted and run credit checks on the business and the business owners.
• To qualify for credit facilities, the dealership needs to have good credit history to demonstrate to the funder that a new credit line is appropriate and help them assess the size of facility. Low credit scores and some adverse marks on a credit history won’t always prevent an individual from obtaining a facility, but it will limit the amount of capital a lender is willing to give to a particular dealer and at what rate.

How to apply for stocking finance

MAF Finance Group can compare finance offerings from a wide panel of lenders to find the best option for you.

If you would like to get a quote or need further information, simply fill in the form and we will contact you. If you want to speak to someone directly, you can call us on 0115 958 6872 and a member of our team will be happy to speak to you. Alternatively, email us at [email protected].