Your best seller has two weeks of stock left.
Your supplier wants payment before they'll ship. And your cash is already tied up in the last order.
Which money do you take?
That's the real question behind inventory financing vs. revenue-based financing for Shopify. Say your supplier wants payment 60 days before delivery and your product takes 45 days to sell through.
That's a 105-day cash gap on every purchase order. Both options close it. They just charge you differently, collect differently, and punish different mistakes.
Here's how each one works, what it really costs, and how to pick without getting burned.
Inventory Financing vs. Revenue-Based Financing: The Short Version
Inventory financing is asset-based lending where your stock is collateral. A lender advances cash to buy a specific batch of goods, and that batch secures the loan.
Revenue-based financing (RBF) gives you a lump sum and takes back a fixed percentage of your sales until you've repaid the advance plus a flat fee. Nothing specific is pledged. The lender is underwriting your sales data.
Plain English: one is tied to what you're buying. The other is tied to what you're selling.
| Inventory financing | Revenue-based financing | |
|---|---|---|
| What it funds | A specific PO or batch of stock | Inventory, ads, or general working capital |
| Collateral | The inventory itself | Your sales history |
| Repayment | Fixed installments | % of daily revenue |
| Typical cost | 8%–30% APR on inventory loans | 5%–12.5% flat fee |
| Best for | Predictable, repeat SKUs | Seasonal or ad-driven growth |
How Inventory Financing Works for Shopify Stores
Most ecommerce lenders advance 50% to 80%, so you still cover the rest. The money is tied to a purchase order or batch, not dropped into a general pool of cash.
Repayment is where products split. A traditional inventory loan means fixed payments. Marketplace-style lenders like Kickfurther flip that: you don't start paying until the inventory sells.
The catch? It assumes you know your demand. Inventory financing doesn't fix demand. Fund a SKU that stalls, and you still owe the money.
How Revenue-Based Financing Works (Including Shopify Capital)
Shopify Capital
If you're eligible, it's already in your admin. Repayment is a percentage of daily sales, including retail and other channels. Sell more, repay faster. Sell nothing, repay nothing.
You'll usually see two fee structures:
- Fixed fee: a 13% factor rate on $100,000 costs $13,000, no matter how fast you repay.
- Monthly fee: $1,400 a month on $100,000 means $4,200 over 3 months or $15,400 over 11.
The rule of thumb: divide the fixed fee by the monthly fee to find your break-even time. In that example, $13,000 ÷ $1,400 is about 9.3 months. Repay faster than that, and the monthly fee wins.
Third-Party RBF (Clearco, Wayflyer)
Clearco charges a 6% to 12.5% flat fee, repaid through a weekly revenue sweep capped near 30%. Wayflyer's fees land between 5% and 10%, with 3 to 9 month repayment.
Neither needs collateral on your stock. Both underwrite off your Shopify data.
What Each One Actually Costs
Flat fees look cheap until you annualize them. The shortcut: APR is roughly fee % × 12 ÷ months to repay.
Take a $50,000 inventory order and an 8% fee. That's $4,000. If your sales repay it in 4 months, you're at about 24% APR. If it takes 8 months, about 12%. Same dollars, very different rate.
Here's what the numbers look like at scale. On a $500,000 inventory position over six months, a bank line costs about 8% APR, revenue-based financing runs 16% to 40%, and purchase order financing hits 18% to 72%.
💡 TIP: With a flat fee, paying early doesn't save you money. You owe the same total either way, so quick payback only pushes your effective APR up. Ask any lender whether early repayment cuts the fee before you sign.
Which One Fits Your Store?
There's no universal winner. Match the money to the job:
- One big, predictable restock: inventory financing. You know the SKU, you know the sell-through, and the stock secures the deal.
- Seasonal or lumpy sales: RBF. Busy day, you pay more; zero-sales day, you pay nothing. That protects cash flow in slow weeks.
- Stock plus ad spend in one raise: RBF, since it isn't locked to a purchase order. Just don't fund ads you can't prove (more on that below).
- Slow-moving or untested SKUs: neither. Fix demand first.
From Jack: From where we sit, most Shopify brands reach for RBF first because it's fast and already one click away in Shopify. That's fine for flexibility. But we've seen the same mistake repeat: founders borrow against platform-reported ROAS, not real margin, and the repayment sweep quietly eats the profit they were counting on.
Our take: From where we sit, most Shopify brands reach for RBF first because it's fast and already one click away in Shopify. That's fine for flexibility. But we've seen the same mistake repeat: founders borrow against platform-reported ROAS, not real margin, and the repayment sweep eats the profit they were counting on.
Run the Margin Math Before You Borrow
Financing only works if each dollar you put into stock or ads comes back with room to spare. That starts with your contribution margin, what's left after COGS, shipping, fees, and acquisition cost.
Then check your floor: break-even ROAS is 1 ÷ contribution margin. At a 30% margin, that's 3.3x. If your campaigns run at 2.5x and you borrow to scale them, you're paying a lender to lose money faster.
A 13% fee is cheap when inventory turns a healthy margin. It's expensive when the cash just sits. Run your reorder through your real numbers first.
💸 Want ad spend that actually clears break-even? TGM has managed $336M+ in ad spend across 218+ DTC brands, and we tie every engagement to contribution margin, not vanity ROAS. See our Shopify services →
Capital buys you inventory. It doesn't buy you demand. If you're about to take on financing and want to know your ads can carry the repayment, let's talk. Book a growth call and we'll pressure-test the numbers with you before you sign anything.
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