Quick answer
You can use stock as security for a business loan, but a lender counts it at what it would fetch in a quick sale, not what you paid or what you'll sell it for. Slow-moving, perishable, customised and supplier-owned lines are left out, and a supplier's retention-of-title registration on the PPSR can rank ahead of the funder. Fast-selling, standard lines count for the most.
Key points
- Lenders value stock at a liquidation view, which is usually well below cost and far below your retail price.
- Eligible stock is standard, fast-selling and easy to resell. Perishable, customised, aged and damaged lines usually fall out.
- A supplier's purchase money security interest (PMSI) or retention-of-title claim on the PPSR can take priority over a funder's security.
- Stock rarely stands alone. It's usually one leg of a wider facility alongside debtors, equipment or property.
- A clean stock list, a PPSR search and supplier terms in hand make the lender's valuation faster and fairer.
You can use stock as security for a business loan, but the lender will count it for much less than it’s worth to you. They value it at what it would fetch in a quick sale, leave out anything slow, perishable, customised or still owned by a supplier, and check the PPSR to see who else has a claim. Standard, fast-selling lines count most. Everything else is a discount or a zero.
That gap surprises people. A stockroom full of product feels like the strongest thing on the balance sheet. On a funder’s sheet it’s often the softest. This guide walks the shelves the way a lender does, so you know what stands behind the loan before anyone asks.
Why does a lender count stock for less than it’s worth?
Because the lender has to picture the worst day. If the loan goes wrong, someone has to sell your stock fast, in bulk, to strangers, without your shopfront, your customers or your margin. That’s the number that matters, and it has a name: liquidation value.
Think about three prices for the same pallet of product:
- What you paid. Cost, including freight and duty.
- What you’ll sell it for. Retail price over weeks or months.
- What a buyer pays in a hurry. The liquidation figure, and the one a funder leans on.
The funder then lends only a portion of that last figure, so there’s a cushion for the cost of collecting, storing and selling. The result is that a lender may count a stockroom at a fraction of its retail value. Exact percentages vary by funder and by stock type, so be wary of any page that quotes one number for everything.
Stock is also the one asset that changes every day. Equipment sits there. Property sits there. Your inventory is sold and replaced constantly, so the lender is really lending against a moving pile. That’s why stock-based lending often comes with regular reporting.
Which stock counts and which gets left out?
Funders sort stock into eligible and ineligible. The test is simple: could a stranger buy this quickly, without you?
Usually counts
- Standard, branded or commodity lines with many buyers.
- Fast-moving lines with steady sales history.
- Finished goods in good condition in a location the lender can inspect.
- Stock you’ve paid for and own outright.
Usually left out
- Perishables and short-shelf-life goods.
- Customised or made-to-order items for one customer.
- Damaged, returned or obsolete lines.
- Old stock that hasn’t moved for six months or more (the cut-off varies by funder).
- Work in progress and raw materials that aren’t saleable as they are.
- Consignment stock and goods still owned by a supplier.
- Goods in transit or held at third-party sites without access.
Some industries get hit harder. A jeweller’s diamonds, a florist’s bunches and a boutique’s last-season range are all real value that a lender may count at close to nothing. A timber merchant’s or tyre wholesaler’s standard lines, with a broad buyer market, tend to fare better.
Illustrative: one stockroom, three views
Here’s an example to show the shape. The figures are illustrative only.
A homewares retailer holds stock listed at $400,000 at cost.
| What’s on the shelves | At cost |
|---|---|
| Fast-moving standard lines | $240,000 |
| Slow lines, unsold for 9 months | $60,000 |
| Customised and made-to-order items | $30,000 |
| Supplier-owned stock under retention of title | $50,000 |
| Damaged and returned | $20,000 |
The lender removes the supplier-owned stock, the customised items and the damaged lines first. That leaves $300,000. It then removes the slow lines, leaving $240,000 of eligible stock. It values that on a quick-sale basis, which could be a good deal lower than cost, then lends against a portion of that. The owner started with a $400,000 list. The amount the stock supports could end up as a modest slice of it.
That isn’t a failure. It’s just how the asset is read. The practical lesson is that the owner can lift the eligible slice before applying, by clearing slow lines, separating supplier-owned goods in the stock list and fixing the records.
Who else has a claim on your stock?
This is the part most owners don’t know about, and it can decide the deal.
The Personal Property Securities Register (PPSR) is where security interests in stock are recorded. A supplier who sells you goods on credit may keep ownership until paid. Under the Personal Property Securities Act 2009 (Cth), that retention of title is generally treated as a security interest. If the supplier registers it as a purchase money security interest (PMSI) in the right way and in time, it can rank ahead of a lender who registered earlier.
According to the PPSR’s PMSI guidance, a PMSI has special priority rules. For stock held as inventory, the timing is tight: the supplier generally needs to register before you take possession of the goods, and flag the PMSI claim on the registration. Law-firm commentary on the Act also points to notice requirements to existing secured parties. Check the Act itself and your own supplier terms for the detail.
What it means for you:
- A funder will search the PPSR for your business and for your main stock suppliers’ claims.
- Stock that a supplier can claim first may be excluded from the funder’s count, or the funder may ask for a deed of priority from the supplier.
- If your bank already holds a general security over all your assets, a new stock-backed funder may clash with it. We cover that in combining funding routes without clashing.
If you want a refresher on how the register works, our PPSR guide covers it from the owner’s side.
Want to see where your stock sits before a funder does the sorting? Check your options and a real person will talk it through with you.
What routes can use stock as the starting point?
Stock rarely carries a loan alone. These are the usual ways it’s used:
- A stock or inventory facility. The lender sets a limit against eligible stock, reviewed regularly. See our page on stock and inventory funding.
- A line of credit with stock as part of the security. The limit is sized on turnover and bank statements, and stock adds comfort. Read about a business line of credit.
- Purchase order or trade finance. Funding sits against the order or the incoming goods, rather than stock you already hold. See trade and purchase order finance.
- A general security over the business. The lender takes security over all present and future assets, stock included. It’s wider cover for a larger amount, but it can block other funders.
- Property or debtor security alongside. Where stock is too soft, a second asset carries the weight.
For context, unsecured and cash-flow options typically run from $5,000 to $500,000, sized on turnover and bank statements, and property-secured options typically from $20,000 to $5,000,000. Stock-backed structures sit alongside those, depending on the business.
An honest word on fit: if your stock is mostly perishable, customised or unpaid, stock security is the wrong tool. A cash-flow facility sized on your sales will usually do more.
How does the ATO value your stock, and does it help?
Only a little. For tax, the ATO allows trading stock to be valued at cost, market selling value or replacement value, and a lower amount for obsolete stock where it’s reasonable. See the ATO’s trading stock page. The simplified trading stock rules for small businesses can let you skip a full stocktake if the change in stock is small, so check the current thresholds with your accountant.
That matters because your year-end stocktake is a handy document. It shows what you hold and how you value it. But it isn’t the lender’s number. A stocktake at cost may be $400,000 while the lender’s quick-sale view is far lower. Don’t be caught off guard by the difference.
Why does the timing matter this season?
Black Friday falls on 27 November 2026, and many retailers have stocked up for it and for Christmas. Stock in the weeks before the peak is at its most saleable, with a visible sales trend and fresh product. After the peak, unsold seasonal lines lose value quickly and the lender’s view of them drops.
If you need funding tied to stock for the trading season, the order of play is:
- Get your stock listing and sales history together while the shelves are full.
- Search the PPSR for supplier claims and old registrations.
- Talk to a funder while stock is still moving, not in February.
It’s also worth remembering what’s coming after the peak. The BAS for the October to December quarter is due on 28 February 2027 for most quarterly lodgers, and a funder will want to know how you’ll cover it. Our guide on building a funding pack lenders want lists what to have ready.
What should you have ready before you apply?
Hand a funder these and the valuation goes faster:
- A stock listing by line: quantity, cost, location and last sale date.
- An ageing split: moving, slow and dead.
- A note of anything perishable, customised, damaged or on consignment.
- Supplier terms, especially any retention-of-title clauses.
- A PPSR search on your own business, and one on your main suppliers if you can.
- 12 months of sales by product line, and recent bank statements.
- Your last stocktake and how you valued it.
Separating the slow and supplier-owned lines yourself shows the funder you know your business, and it keeps them from marking the whole pile down.
Where does your stock fit?
Stock is a real asset, but it’s the one lenders trust least on its own. The right route depends on what else you hold. If you have unpaid invoices, equipment or property, stock can add weight to a wider facility. If it’s all you have, a cash-flow route sized on your sales may suit better, and the honest answer might be a smaller amount than your shelves suggest.
Most retailers and wholesalers in this spot aren’t in trouble. They’ve put their money on the shelf, and need a way to turn some of it into working cash while it sells.
See what your shelves can stand behind
Full shelves are a good problem, and a better one when someone looks at them the right way. Enquiring takes about 60 seconds, and asking won’t touch your credit score. We don’t send your details to a pile of lenders, so your phone won’t light up; a real person reads your situation, then calls to talk it through. Please fill the form in accurately, including what stock you hold and who’s owed for it, so we can match the right option first time.
Frequently asked questions
Can I use inventory as collateral for a business loan in Australia?
Yes. A lender can take a security interest over your stock and register it on the PPSR. In practice it counts only the part of your stock that is easy to resell, valued on a quick-sale basis, and it often asks for security over other assets too, such as debtors, equipment or property.
How do lenders value inventory as collateral?
They start from your stock listing and ask what a buyer would pay for it if it had to be sold quickly, then take a further margin off for the cost of selling it. Cost price is a starting reference, not the answer. Age, how fast each line sells, condition, shelf life and how many buyers exist all move the figure.
What stock won't a lender count?
Typically perishable goods, anything customised or made to order for one customer, damaged or obsolete lines, old slow-moving stock, goods still owned by a supplier under retention of title, stock held on consignment, and goods that sit in a location the lender can't easily inspect or reach.
What is retention of title and why does it matter for stock finance?
It's a supplier term saying they keep ownership of goods until you've paid. Under the PPSA, it generally counts as a security interest, and if the supplier registers it correctly as a purchase money security interest it can rank ahead of an earlier-registered funder over that stock. A lender will search for these before counting your shelves.
Is stock valued the same way for tax and for a loan?
No. For tax, the ATO lets you value trading stock at cost, market selling value or replacement value, and allows a lower figure for obsolete stock. A lender's liquidation view is a separate, harsher test. Your year-end stocktake is a useful document to hand over, but it won't be the number the lender uses.
Should I borrow against stock before Christmas or after?
Before, if you need it, because stock on the shelf in November is at its most saleable. After the peak, unsold seasonal lines lose value fast and a lender's view of them drops. Talk to a funder while the stock is still moving, and share your sales history so they can see the pace.
What if my stock is mostly on supplier terms or not yet paid for?
Then much of it isn't really yours to offer. A funder will usually count only the stock you've paid for and that is free of supplier claims. Unpaid stock may be better funded through supplier terms, purchase order funding or a line of credit that doesn't rely on counting each item.