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Peak season for ecommerce brands can be the biggest test for your working capital.
The cycle of putting up cash for stock weeks ahead of trading days, waiting for goods to be manufactured, shipped, sold, and payment processors to pay out is a lengthy process. This gap between paying the supplier and receiving customer revenue is exactly what ecommerce stock finance can help with. The idea is to help you buy stock to meet demand, without sacrificing the rest of your business cash, where it can be put towards marketing, payroll, returns or VAT.
With online retail continuing to grow, solving these problems is more important than ever. The ONS reported that in the UK, online sales accounted for 27.6% of all retail sales in May 2026, with online spending values up 12.2% year on year that month. When peak season hits, make sure you are prepared. In this article, we take you through some of the ways to take advantage of the sales opportunities, without the pressure of stock planning.
Key Takeaways
- Stock finance helps bridge the cash flow gap between paying suppliers and receiving customer revenue, so you can prepare for peak season without draining working capital.
- Planning ahead reduces the risk of stockouts, lost sales and costly last-minute reorders during busy trading periods.
- Different funding options suit different needs, from purchase order finance and revenue-based funding to inventory loans and business lines of credit.
Table of Contents
Why funding stock before peak season matters
Waiting until peak season hits to fund your stock is a big mistake. Salesforce holiday research in 2022 showed that 42% of shoppers said they would start holiday shopping early due to prices, with Salesforce predicting that 29% of holiday sales would happen in November, three weeks before Cyber Week even started.
Out-of-stock products can lose customers as well as sales
It is foolish to assume that shoppers will be attentive in waiting for your restock. In a 2021 McKinsey survey, only 13% of consumers who met with an out-of-stock product waited for it to come back. Around 70% swapped retailers or brands.
It doesn’t matter if you are profitable
Even healthy ecommerce businesses can run out of usable cash before peak seasons. Cash flow can quickly turn negative after a large order, months before revenue is set to come in. Inventory finance, stock finance and other working capital products are all designed to bridge the gaps for healthy businesses, rather than rescue failing ones.
Signs your business needs inventory finance
There are a number of telltale signs inventory finance is something you should be looking at. Some of the main signs include:
Payments due before revenue has landed
Making a cash flow forecast is an easy way to see if you will end up paying suppliers before your revenue has materialised from your payment processor. For lenders and investors, cash flow forecasts are important pieces of information, allowing them to see if you can handle growth as well as meeting obligations.
Your last peak season made stockouts, rushed reorders or margin erosion
A few scenarios to recognise: running out of best sellers, paying for emergency shipping, and cutting purchase volumes due to cash flow issues. If any of these happened to your business, you have enough evidence that stock finance could be useful for you. It is fair to assume these problems will repeat unless the underlying issue is addressed, highlighted in McKinsey’s work on switching behaviour.
Cutting marketing to afford stock (or cutting stock to afford marketing)
If your cash is so tight that every purchase order makes you rethink your ad spend (or vice versa), you have a working capital problem. Ecommerce stock finance is there to help one growth lever from harming another.
Types of stock and inventory financing for ecommerce businesses
Here are some of the most useful options for ecommerce businesses facing cashflow issues, according to the British Business Bank.
Business line of credit
Often structured as a working capital revolver, business lines of credit can be a good and flexible option if your stock buying patterns repeat across the year. It can be thought of as a line of credit attached to your balance sheet, with the ability to be reborrowed and repaid over and over again. While it does give ultimate flexibility, the availability of this for your business is highly dependent on your financial profile and assets.
Inventory loan or asset-based lending
If your business is already asset rich, an inventory loan or other asset-based lending product may suit you best. British Business Bank defines asset-based lending as finance secure against assets such as inventory, accounts receivable, property or equipment. For more established ecommerce businesses with strong reporting, this may be a good fit. Secured finance allows for larger borrowing, but eligibility and monitoring is often stricter. The quality, liquidity and control of the stock all comes into consideration.
Purchase order financing
This is the best option if you have confirmed demand, but cannot immediately pay your supplier with cash. PO financing helps you to fulfil customer orders that you might otherwise have had to turn down. A funder advances money to pay the supplier, with repayment being made once the end customer pays. Suitable business for PO financing include wholesalers, those with large B2B orders, and those that receive confirmed retailer purchase orders. It is less ideal for speculative buys, where demand is forecasted.
Revenue-based financing
This is quite popular with ecommerce brands, as repayments are more closely aligned with sales. It can be defined as capital provided in exchange for a percentage of ongoing gross revenues. Merchant cash advances are similar, with repayment taken as a percentage of card sales. If revenue is strong but uneven, you can take advantage of easing the repayments in slower weeks. However, as this is a faster and easier working capital product, it can carry higher overall fees than a traditional bank loan.
Negotiating supplier terms
For an ecommerce business, good supplier terms would require a lower deposit, longer balance terms, or ideally split across production milestones. As little cash outlay as possible is the goal. However, whilst extending payment terms improves working capital, it could also just move the financial strain further down the supply chain.
How to choose the right option for your ecommerce business
Ideally, you should match the financial product that is best suited to your biggest problem. If your issue is recurring seasonal reorders, then a line of credit is better than a one-off loan. One large confirmed order can be paired with PO financing. If your repayments need to fluctuate with turnover, then choose a revenue-based product. If you have large amounts of stock, choose asset-based lending. However, there are many other factors to consider that affect the total cost, including the cost of capital, repayment structure and fees. Rise Funding can help match your ecommerce business to the ideal finance product. For related cash planning, this is where our resource How to maintain company cash flow can prove useful. (See also the British Business Bank’s four-step guide to cash flow forecasting.)
How to apply, and what lenders look for
There are a number of factors to consider when preparing a loan application. Here are some of the most important tasks to complete before considering a finance application.
Building a credible cash flow forecast
Lenders want evidence that their credit will solve the specific cash flow problem you’ve identified, and that the repayments are affordable. To assess profitability and overall financial health, lenders will look at cash flow forecasts and business credit ratings. For ecommerce, you need the following on your forecast: reorder timing, supplier payment dates, stock arrival, marketing spend, expected sell-through, gross margin, and the repayment path. Read more in our article How to get a business loan.
Trading history, margins and stock performance
For unsecured working capital, lenders look at turnover, trading history and credit rating. For ecommerce specifically, it is helpful to prepare product margins, sales consistency, channel concentration, and how quickly stock converts back into cash. Ideally, you will have repeatable demand, sensible margins and clean operations.
Credit profile and personal guarantees
Business borrowing in the UK requires proof of being UK-based, the ability to show you can repay, and having no late payments or outstanding CCJs. Some lenders might also require a personal guarantee. For SMEs with limited business credit history, your personal credit score might also apply.
Preparing your ecommerce business for funding
Timing is important. Be sure to plan your application well in advance. Forecast your demand early, take the time to map your supplier and fulfilment times backwards. If your busiest trading period is Christmas, our article Surviving the Christmas season as a business is a useful read. If your immediate focus is liquidity management, How to maintain company cash flow fits well. And if you are still comparing funding routes, How to get a business loan is the logical next step.
To discuss your options, whether it be to get a business loan, cashflow funding or others, you can call one of Rise Funding’s experts for individualised advice. Contact us through the form below, or get an instant business quote by completing our online questionnaire.
