Stock is cash sitting on a shelf. For retailers, wholesalers, importers and hospitality businesses, getting the right amount at the right time is the difference between a strong season and a scramble. The trouble is that the stock has to be paid for weeks — sometimes months — before it sells.
Why stock squeezes cash flow
Take a Christchurch outdoor retailer preparing for summer. Orders go in around July. Suppliers want payment by September. The stock sells October through January. For three or four months, the business is carrying tens of thousands of dollars of product while still paying rent, wages and GST.
This isn’t a profitability problem. It’s a timing problem — the gap between cash out and cash in. The cash conversion cycle guide shows how to measure it in days.
Common reasons to fund stock
- Seasonal build-up — Christmas retail, summer outdoor gear, winter heating products, ski season in Queenstown and Wānaka.
- Bulk-buy or early-payment discounts that are larger than the cost of borrowing.
- Import orders — a container from overseas needs paying before it lands at the Ports of Auckland or Lyttelton.
- New product lines or a new major customer that needs you to hold more inventory.
- Supplier price rises you want to get ahead of.
Three ways to fund inventory
Line of credit
A business line of credit suits businesses that buy stock repeatedly. Draw when the order goes in; repay as it sells. Assessed on turnover and bank statements, usually after six or more months of trading.
Unsecured loan
An unsecured business loan works for a single, defined order. Weaker credit is considered and decisions are sometimes same day.
Property-secured loan
For bigger orders, or newer businesses without six months of statements, a property-secured loan of $20,000 up to $1m against NZ property can fund stock without needing financials for the initial assessment.
Doing the maths on a bulk-buy discount
Borrowing to capture a discount only makes sense when the saving beats the total cost of the funding. A worked example (illustrative only):
| Usual stock order | $60,000 |
| Supplier discount for ordering the full season up-front | 8% |
| Saving | $4,800 |
| Question to ask | Is the total cost of borrowing $60,000 for the period it’s needed less than $4,800? |
If the stock sells quickly and the funding is short, the answer is often yes. If the stock risks sitting unsold, the saving evaporates. Ask your lending specialist for the total repayment on a quote so you can compare like with like.
Don’t forget GST on stock
If you’re GST-registered, you’ll usually claim back GST on stock purchases in the period you pay (payments basis) or are invoiced (invoice basis). On imports, GST is collected at the border by Customs and can then be claimed back. Either way, the timing affects your cash. The GST & provisional tax planner helps you see what’s owed and when.
Managing stock risk
Funding makes it possible to buy more stock; it doesn’t guarantee it sells. A few habits that protect you:
- Fund your proven sellers first; test new lines in smaller quantities.
- Track sell-through weekly and repay the facility as stock converts.
- Keep a clearance plan for end-of-season leftovers.
- Don’t use stock funding to cover ongoing losses.
Example scenario
Example scenario — generic and illustrative. An Auckland homewares importer places its Christmas orders in July. The supplier wants a deposit on order and the balance before shipping in September; the stock lands in October and sells through to January. With six years of steady bank statements, the business uses a line of credit: it draws for the deposit and balance, pays GST at the border, and repays the facility weekly from November as the stock sells. By February the facility is back to zero, ready for the next cycle.
Next step
Tell us about your stock plan — what you’re buying, when it sells and roughly how much you need. It takes about 60 seconds and doesn’t affect your credit score.