Stock and inventory finance secured by property

Stock is the most awkward asset to borrow against. It moves, it ages, it can be returned or marked down, and the supplier who sold it to you may still have a claim over it. Lenders who take stock as security protect themselves with low advance levels, monthly reporting and charges over the whole business.

There is a simpler route if you own property. Borrow against the real estate, buy the stock outright, and repay the loan as the stock sells. The goods stay yours to move, discount and sell without asking anyone’s permission.

What does property-secured stock finance pay for?

Most enquiries fall into one of four patterns:

• The seasonal build. Retailers, wholesalers and distributors who must buy months before the selling peak: Christmas, end of financial year, back to school, the start of a building season.
• The bulk-buy discount. A supplier offers a meaningful saving for a large order or upfront payment, and the business does not have the cash to take it.
• The indent order. Goods ordered from an overseas factory that require a deposit at order and the balance before shipping. Our page on import shipments and customs duty covers the landed-cost side.
• The new range or new customer. A major retailer or distributor accepts your product, and the first order is bigger than anything you have funded before. That overlaps with funding a big contract.

In every case the money is for trading stock, which is a business purpose, and the plan to repay comes from selling it.

Why lend against property instead of the stock?

Here is the practical difference.

Feature	Stock or inventory lender	Loan secured on property
What is secured	The goods, usually with a charge over all business assets	Your home, investment or commercial property
How much you receive	A portion of stock cost, recalculated as stock changes	Based on property equity, independent of stock levels
Ongoing reporting	Regular stock and sales reports	None tied to stock; keep us informed of the exit
Effect of a supplier’s retention of title	Supplier’s PMSI generally ranks ahead over the same goods	Not relevant to the security
Freedom to discount or move stock	Often restricted	Unrestricted
Term	Revolving	Fixed short term matched to the selling season

The PPSR explains why stock lenders tread carefully. A supplier selling on written credit terms, where the goods are not the customer’s until paid for, holds a security interest. Registered on the PPSR, that interest is a purchase money security interest, and the PPSR says it has higher priority than other security interests over the same property. A lender relying on the goods may rank behind your own suppliers. A lender relying on your property does not care.

Before you borrow, you can run a $2 organisation search on your company’s ACN on the PPSR to see which security interests are already registered against its assets. It is worth knowing what is there before anyone asks.

How it works, step by step

1. Work out the buy. The order value, the deposit and balance dates, freight, and any GST or duty.
2. Model the sell-through. How many weeks until the stock is mostly sold, using last season as the guide.
3. Enquire. Property details, what is owing, the amount and the repayment plan. No credit check to enquire.
4. Choose the structure. A second mortgage behind an existing bank loan is common. A caveat loan suits a shorter, faster deal. A first mortgage suits debt-free property.
5. Letter of Offer and settlement. Funds can be paid to the supplier, to your account, or split by payment date.
6. Repay as sales land. In one sum at the end, or in reductions along the way if the deal allows.

How much should you borrow for a stock build?

Owners tend to size the loan to the full order. A better approach is to size it to the gap between what the order costs and what the business can fund itself, then add a buffer for the things that always cost more than planned.

• Start with the landed cost, not the supplier price: freight, insurance, duty, GST and local delivery.
• Subtract what the business can safely put in without starving payroll and tax.
• Add a margin for slippage, such as a late shipment that pushes the selling window back, or a reorder of the lines that sell fastest.
• Check the equity headroom with the equity calculator, using what is genuinely owing on the property today.
• Set the term to the slow case. If the stock usually clears in four months, a six-month term costs a little more but avoids an extension in the worst month of the year.

A smaller loan with a comfortable buffer is easier to approve and easier to repay than a large one sized for a perfect season. If you have the order and property details in front of you, send a quick stock-finance enquiry and a specialist will sense-check the size with you.

Who it suits

• Seasonal retailers and wholesalers with a proven selling peak.
• Distributors who have won a new account and must stock up before the first order ships.
• Businesses offered a supplier discount worth more than the loan costs.
• Owners whose bank caps the overdraft based on last year’s accounts, even though this year’s orders are larger.
• Businesses that would rather not hand a general security over everything to a stock lender.

It works best where the stock is not perishable or fashion-sensitive, and where the business has sold the same lines before.

When this isn’t the right move

• Recurring, all-year stock funding. If you need inventory finance every month indefinitely, a bank facility or a dedicated trade finance line suits the pattern better. A short-term secured loan is for a defined build.
• Untested product. If you have never sold the line, the sell-through is a guess. Order less, or fund the first run from cash.
• Thin margins on discounted stock. A bulk-buy saving can vanish once the full borrowing cost and a slow season are counted. Do the maths in dollars first.
• No property, or no equity. This lending needs real estate security. Without it, look at supplier terms or an unsecured lender, accepting the cost.
• Stock you might not be able to sell. Short-dated, perishable or trend-driven goods make a weak exit.

For the wider trade-off, see secured vs unsecured business loans.

What it costs (without the guesswork)

There is no published price for this kind of loan. The price reflects the property, the loan-to-value ratio, the length of the selling season and how confident everyone can be about the exit, and the goal is the keenest pricing your deal can carry. The cost has four parts:

• Interest. It can be prepaid or capitalised, so every borrowed dollar goes into stock and nothing leaves the business monthly. See prepaid or capitalised interest.
• An assessment fee, varying by loan and set out on the Letter of Offer.
• Legal and registration costs for the mortgage or caveat, and its later discharge.
• Your own advisers, if you have the documents reviewed.

There is no formal valuation required, so no third-party report fee sits in the mix. A second mortgage or caveat costs more than a first mortgage because it ranks behind the bank.

Documents you’ll need

• Identification for borrowers, directors and guarantors.
• Property details and a current statement for any existing mortgage.
• The supplier quote, purchase order or pro forma invoice.
• A simple sell-through forecast, ideally with last year’s sales for the same lines.
• Company or trust details if the borrower is an entity.

How fast

Funding is possible within 24 to 48 hours for up to $5m once documents are in. Amounts from $20k to $250k secured on property are possible same day. For a seasonal build, the real deadline is usually the supplier’s production slot or shipping date, so start the enquiry when you place the order, not when the balance invoice arrives.

Illustrative example: a Christmas build for a homewares wholesaler

Illustrative example: A Brisbane homewares wholesaler needs $350,000 of stock landed by late October. The owners hold a commercial unit worth about $1,100,000 with $380,000 owing to a bank. At an illustrative 65% band on total debt, the unit supports about $715,000 in total borrowing, leaving headroom of about $335,000. Last year the same lines sold about 70% of units by the end of January.

Waterfall	Amount
Property headroom at the illustrative band	about $335,000
Less interest allowance, capitalised over 6 months	set per deal
Less assessment fee and legal costs	set per deal
Net funds available for stock	a little under $335,000
Shortfall against the $350,000 order	funded from the business’s own cash
Exit	Sales from November to February, with a 6-month term for buffer

The owners took a slightly smaller loan than the full order and funded the balance from cash, which kept the security headroom comfortable. A six-month term allowed for slow January trade rather than assuming a perfect season. If you are in Queensland, our Brisbane private lending page covers local points on title and timing.

Tax and accounting points to raise with your accountant

• The ATO says trading stock is deducted the same way as your other expenses, and stock on hand is accounted for at year end.
• Small businesses with aggregated turnover under $10 million may use the simplified trading stock rules if they reasonably estimate stock changed by $5,000 or less in the year, and then need not do a formal stocktake. A big seasonal build may take you outside that threshold.
• Interest on a loan used for business purposes is generally deductible, but how prepaid interest is treated depends on your circumstances. See is business loan interest tax deductible.

If your stock build is part of a wider cash-flow squeeze, business expansion funded by property shows how other owners have structured growth.

See if you qualify for a stock loan in time for your order

Ordering season does not wait for a bank’s credit committee. Asking costs you nothing: no credit check at enquiry, and your details go to a single direct lender rather than a broker’s panel. A specialist reads every enquiry. The more accurately you describe the property, the amount owing on it and when the stock will sell, the faster and firmer the answer.

Tell us about your stock build and the property behind it, or compare structures on secured business loans.