Stocking Finance

Last updated: 26/02/2025

What is Stocking Finance?

Stocking finance, also known as stock funding or unit stocking, 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.

Advantages of stocking finance

Some of the advantages of using stocking finance are:

Increased inventory levels

One of the main benefits of stocking finance for companies is that it enables businesses to increase their inventory levels without tying up their cash flow. By accessing stocking finance, businesses can purchase larger quantities of inventory and hold it for longer periods of time, without worrying about the impact on their cash flow.

Improved cash flow

Stocking finance can also improve cash flow for companies. By using stocking finance, businesses can hold on to their cash reserves and use the facility to fund inventory purchases. This enables businesses to free up their cash flow and use it for other business operations, such as marketing, advertising, or expanding their product range.

Competitive advantage

Stocking finance can also give companies a competitive advantage. By having access to stocking finance, businesses can increase their inventory levels and offer customers a wider range of products. This can help businesses stand out from competitors and attract new customers.

Cost savings

Another benefit of stocking finance for companies is cost savings. By purchasing inventory in bulk, businesses can take advantage of volume discounts and save money on purchasing costs. This can help businesses improve their profit margins and increase their overall revenue.

Flexibility

Finally, stocking finance offers companies flexibility. This type of financing is typically short-term, which means that businesses can use it for specific inventory purchases and repay the loan once the inventory is sold. This enables businesses to manage their cash flow more effectively and avoid long-term debt.

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.

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.

 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].