Published: 03/31/2026
Last updated: 03/31/2026
You've passed the hard part. The product works, orders are coming in, and you've got real revenue behind you. But somewhere around the £1M revenue mark, a familiar problem tends to get louder: your cash can't keep up with your ambition.
You're paying suppliers 30, 60, sometimes 90 days before the money comes back. Every new retail account, every seasonal restock, every product launch pulls cash forward. And the options that made sense early on – a bank overdraft, a director's loan, maybe a small equity round – start to feel like the wrong tools for the job.
This guide is for founders and CFOs at product businesses who are at that point in their scaling where they need to think more deliberately about how they finance growth. Not just what's available, but what actually makes sense at your stage – and what the real trade-offs are.
We'll cover the main types of business finance available to product businesses – inventory financing, invoice financing, bank credit, supplier terms, and equity – with a clear-eyed look at when each one works and when it doesn't. Think of it as a practical guide to business financing options, written for the realities of running an inventory-heavy brand rather than just a checklist of what exists.
💡 Key takeaways
Product businesses have a structural cash gap: you pay before you get paid.
At £1M+ turnover, that gap is bigger and more predictable – which means it can be managed deliberately.
There's no single right answer. The best financing option depends on where your cash is stuck.
Equity and bank loans are often the wrong tool for recurring working capital needs.
Inventory financing and invoice financing are purpose-built for how product businesses actually operate.
Why product businesses face a different financing challenge
Most financing products weren't designed with product businesses in mind. They were built for businesses where cash moves quickly – where a service is delivered and an invoice is paid within weeks, or where revenue is recurring and predictable month to month.
Product businesses don't work like that. You manufacture or import physical goods. That means paying suppliers before production starts, waiting through lead times and shipping windows, and then waiting again while retailers or distributors settle their invoices. The cash gap isn't a sign of mismanagement. It's just the operating model.
What changes as you scale is the size of that gap. A brand doing £500k in revenue might have a manageable cash gap of a few tens of thousands at any given time. The same brand at £1.5M might have hundreds of thousands tied up in inventory and receivables simultaneously – across multiple production runs, multiple markets, and multiple retail relationships all at different stages of the payment cycle.
Even profitable businesses can run into serious trouble when working capital is stretched. As the Federation of Small Businesses notes, overtrading, taking on more than your cash can support, is one of the most common reasons otherwise healthy businesses stall.
And what’s more, it’s not a problem a standard overdraft was designed to solve. And it's worth understanding that clearly before you start evaluating your options.
The real cost of financing with your own cash
Many founders default to self-funding their working capital for longer than makes financial sense. It feels safer. No debt, no interest, no external parties involved. But using your own cash to bridge the gap between supplier payments and customer receipts carries a cost that's easy to miss – because it never shows up as a line item.
The cost is opportunity. Every pound sitting in inventory or outstanding invoices is capital that isn't available for a new product launch, a marketing push, or a bulk production run that would meaningfully reduce your unit costs. At scale, that's not a rounding error – it's a strategic constraint.
SME cash flow positions have broadly returned to pre-pandemic levels after a period of relative strength, according to UK Finance, which means the buffer many businesses have been relying on is thinner than it was.
There's also a ceiling effect. When working capital is self-funded, your growth rate is limited by how quickly cash cycles back through the business. You can only place the next order once the last one has been paid for. Brands that understand this early tend to grow faster – not because they're more aggressive, but because they've separated their growth capital from their working capital, and stopped letting one constrain the other.
A simple way to think about it: if your gross margin is 40% and you're tying up £200k in inventory for 90 days at a time, the cost of financing that inventory externally at 8–10% annually is far smaller than the margin you'd generate by deploying that £200k into the next order cycle instead. The math usually favors financing well before most founders make the switch.
Supplier payment terms: the best form of financing (when you can get it)
If your supplier will let you pay 60 or 90 days after delivery rather than upfront, that's effectively free working capital. You're bridging a chunk of the cash gap without any interest cost, no application process, and no external party involved.
This is worth pursuing aggressively – particularly as your order volumes grow and your relationship with a supplier deepens. Longer payment terms are one of the highest-leverage conversations a founder or CFO can have, and most wait too long to have them.
The honest caveat: supplier terms are unreliable as a primary financing strategy. Many suppliers – especially manufacturers in Asia – want deposits of 30–50% before production begins, with the balance due before goods ship. Extended credit is typically only available to established buyers with significant order history, and it can be withdrawn if a supplier's own cash position tightens. It's a great supplement. It's a risky foundation.
Bank loans and credit lines: the honest picture
Bank financing is the most familiar option and, when it works, usually the cheapest in terms of headline interest rate. For product businesses with strong financials, an established trading history, and predictable revenue, a revolving credit line from a bank can be a solid working capital tool.
But "when it works" is doing a lot of work in that sentence.
Banks assess product businesses through a lens that wasn't built for them. They want audited accounts, often two or three years of them. They want collateral – physical assets, property, or personal guarantees from directors. They want to understand a stable, predictable cash flow, which is exactly what a fast-growing product brand with seasonal cycles and lumpy wholesale revenues doesn't have.
New loan approvals to medium-sized businesses have been trending down year-on-year since the start of 2025, according to UK Finance's Business Finance Review – a sign that the gap between bank appetite and product business reality is widening, not closing.
The application process is also slow by design. A bank credit facility can take months to approve, involves significant documentation, and typically has rigid drawdown structures that don't flex well with the way product businesses actually operate. If you need capital for a specific production run with a six-week lead time, a bank application started after the purchase order arrives will not get there in time.
None of this means bank financing is the wrong choice. For brands at a certain stage of maturity – established, asset-backed, with strong financial reporting – it's often the most cost-effective option for a portion of their working capital. Some banks and specialist lenders also offer working capital loans specifically structured for product businesses, which can be more flexible than a standard term loan. But as a primary funding mechanism for brands in a growth phase, or as a way to finance inventory on a tight timeline, bank financing is almost never the right tool.
What is inventory financing – and how does it work?
For product businesses wondering how to finance inventory without draining cash reserves or waiting on a bank, inventory financing is usually the most direct answer. It's specifically designed to bridge the gap between placing a production order and receiving payment for the goods. A financing provider pays your supplier on your behalf, and you repay the facility once the goods have been sold and your customers have paid.
The structure varies by provider, but the core logic is the same: instead of tying up your own cash in a production cycle that might last four or five months, you use external capital to fund that cycle and preserve your own liquidity for other purposes.
For product businesses in a growth phase – where order volumes are increasing faster than the cash cycle can support – this is often the most directly useful form of financing available. It maps precisely to the problem: cash going out before cash comes in.
The key things to evaluate when considering inventory financing:
Cost vs. opportunity: Compare the financing fee against the cost of the growth or order you'd otherwise have to pass on. The math often favors financing more clearly than it initially appears.
Speed and flexibility: How quickly can a facility be activated? Can it flex with your order size, or is it a fixed facility that requires renegotiation every time your volumes change?
Collateral requirements: Some inventory financing requires a charge over the goods themselves. Others are more relationship-based and don't require formal security. Know what you're agreeing to.
Supplier relationship: Good inventory financing should be invisible to your supplier – they get paid on time and in full, which strengthens that relationship rather than complicating it.
What is invoice financing – and when should you use it?
Invoice financing solves a different problem. Rather than funding the purchase of inventory, it unlocks cash from invoices you've already issued but haven't yet been paid for.
If you supply retailers, distributors, or wholesale buyers on payment terms of 30, 60, or 90 days, you're sitting on a significant amount of cash that's technically yours but not yet available. Invoice financing allows you to access a large portion of that cash immediately – typically 80–90% of the invoice value – with the remainder paid when your customer settles.
The practical benefit is a shorter cash conversion cycle. Instead of waiting 60 days for a retailer to pay, you get most of that cash within days of issuing the invoice. That capital can then go straight back into the next production cycle, rather than sitting idle in your receivables ledger.
Invoice financing is particularly useful for brands that:
Sell primarily through retail or wholesale channels with long payment terms
Have strong, creditworthy customers (which is what most providers are actually assessing)
Are growing fast enough that the timing gap between shipping goods and receiving payment creates a meaningful constraint
One important distinction: invoice financing addresses the receivables side of the cash gap. It doesn't help with the supplier payment side. For brands where the primary constraint is funding production before goods ship, inventory financing is the more relevant tool. Many growing brands end up using both – inventory financing to fund the outbound cycle, invoice financing to accelerate cash coming back in.
Equity financing for working capital: what you're really giving up
Raising equity to solve a working capital problem is one of the most expensive mistakes a product brand can make – and it's more common than it should be.
Equity isn't inherently bad. For the right strategic bet – entering a new market, building out a team, launching a genuinely new product category – external investment makes sense. You're funding a step change in the business, and giving up a share of ownership in exchange for the capital to make it happen is a reasonable trade.
But using equity to fund recurring, predictable working capital needs is a different calculation entirely. A working capital gap that repeats every order cycle isn't a strategic problem – it's a structural one. And structural problems have structural solutions: financing facilities that flex with your business, cost a fraction of equity dilution, and don't require you to share control or upside with investors.
The actual cost of equity capital, when you model it properly, is almost always higher than the cost of debt or specialist financing for working capital purposes. If your business is worth £5M and you raise £500k at a 20% dilution to cover working capital needs, you've effectively paid £1M in future equity value for a problem that a financing facility might have solved for a few thousand pounds in fees.
The right question to ask before any equity raise: is this capital funding a strategic move, or is it filling a cash gap that repeats? If it's the latter, there's almost certainly a better tool available.
→ If you're weighing this up, it's worth reading Why growing brands shouldn't give up equity just to fund stock.
How to choose the right financing option for your business
The market for business financing has expanded significantly in recent years – beyond traditional banks, there are now challenger banks, specialist lenders, and non-bank providers built specifically for businesses like yours. According to the British Business Bank's Small Business Finance Markets Report 2026, businesses are increasingly turning to flexible finance to manage cash flow. The right option depends on where your cash is stuck. Here's a simple framework for matching the right tool to the right problem.
Your cash is stuck in outstanding invoices – customers have received the goods but haven't paid yet. → Invoice financing is your most immediate lever. You're not waiting on an approval process – you're unlocking cash that's already yours.
Your cash is stuck at the supplier stage – you need to place a production order but don't have the liquidity to fund it without constraining other parts of the business. → Inventory financing is built for exactly this. It bridges the gap between the supplier deposit and the eventual customer payment.
Your cash needs are ongoing and variable – you have recurring working capital requirements that fluctuate with your order cycles and seasonal patterns. → A revolving credit line gives you a flexible facility to draw on as needed. Ideally one that understands how product businesses operate, not one designed for service businesses.
You have strong financials, established trading history, and time to spare – your business is mature, your financials are clean, and you're not in a hurry. → A bank loan or facility offers the lowest cost of capital and makes sense when you know exactly what you need. Just be prepared for the timeline and the paperwork.
You're funding a genuine strategic leap – new market entry, significant team expansion, a product line that opens up a meaningfully different part of the market. → That's equity territory. Use it for bets that change the trajectory of the business, not to fill gaps you could solve more cheaply another way.
Most product businesses at scale end up using a combination: inventory financing to fund the outbound production cycle, invoice financing to accelerate incoming cash, and a bank facility for longer-term needs where the cost of capital matters more than speed. The key is matching the tool to the problem rather than defaulting to whichever option feels most familiar.
Real scenario: financing a seasonal restock at £1M+ turnover
To make this concrete, here's how the math typically looks for a product brand managing a seasonal peak – a common pressure point where getting the financing decision right really matters.
A brand in outdoor apparel places its main summer restock order in January. The order value is £80,000.
The timeline looks like this:
Day 0: 40% deposit paid to manufacturer (£32,000 goes out immediately)
Day 60: Manufacturing complete, balance of £48,000 due before goods ship
Day 90: Goods arrive and are distributed to retail partners
Day 150: Retailers settle invoices on 60-day terms
That's five months between the first payment and the last receipt – with a total outlay of £80,000 sitting in the cycle the entire time. Meanwhile, the brand still needs to cover operations, run its spring marketing, and prepare for the next production run.
Self-funding this cycle means £80,000 is unavailable for anything else from January to June. For a brand at £1M+ turnover, that's a significant constraint on what else the business can do during that window.
With inventory financing in place, the dynamic shifts. The financing provider pays the supplier on the brand's behalf. The brand's own cash stays available for marketing, operations, and – critically – the ability to respond to unexpected demand during the peak selling window. The cost of the financing facility is a fraction of the margin generated by having stock available when customers want it.
This is the core logic of why financing makes sense for product businesses at scale: the cost of capital is almost always lower than the cost of the opportunity you'd otherwise have to pass on.
→ How inventory financing works with Treyd.
Summary
For product businesses at scale, the cash gap between paying suppliers and getting paid by customers isn't a temporary problem – it's a permanent feature of the operating model. The goal isn't to eliminate it. It's to fund it intelligently.
The best financing option depends on where your cash is stuck. Invoice financing unlocks receivables. Inventory financing bridges the production cycle. Bank facilities work well when you have time and strong financials. Equity makes sense for strategic bets – not for recurring gaps that a debt facility can handle more efficiently.
Most growing product brands end up using more than one tool. Getting clear on your cash conversion cycle, understanding where the constraints actually sit, and matching the right financing structure to each part of the problem is how the best-run product businesses keep growing without the constant scramble.
About Treyd
Treyd is working capital built for product businesses. We help fast-growing brands, wholesalers, and distributors close the gap between paying suppliers and getting paid by customers – so cash flow stops being the thing that slows you down.
Buy first, pay suppliers later. Advance your customer invoices. No collateral, no lengthy bank process – just a simple, human experience built around how product businesses actually work.
Over 1500 brands trust Treyd to fund their growth. See how at treyd.io/customers →
💜 Grow faster. Keep control. Bet bigger.
