Why working capital matters for consumer brands
Consumer brands are capital-intensive by nature. You’re buying inventory months before you sell it, paying manufacturers before customers pay you, and funding growth with cash that’s always tied up somewhere. Working capital finance bridges that gap and gives you the liquidity to invest in growth without diluting ownership or stalling operations.
The challenge isn’t whether you need it. It’s knowing which type fits your business, your margins, and your stage.
The main types of working capital finance
Revenue-based financing lets you borrow against future revenue with flexible repayment that scales with your sales. Inventory financing uses your inventory as collateral, which works well for brands with predictable demand and strong sell-through. Purchase order financing covers the cost of large orders before you’ve been paid, which is especially useful for brands with wholesale or retail channel growth.
Traditional lines of credit from banks remain an option for established brands with strong financials, but the approval process is slower and the requirements are higher.
How to choose the right option
Start with your cash conversion cycle: how long does it take from paying your manufacturer to receiving payment from your customer? The longer that cycle, the more important your financing structure becomes.
Brands under $5M in revenue typically start with revenue-based financing for its flexibility. Between $5M–$25M, inventory and PO financing become more relevant as order sizes grow. Above $25M, a blended approach with a traditional credit facility often makes the most sense.
What we see brands get wrong
The most common mistake is waiting too long to set up financing. By the time you need working capital, you’re already behind. The second is optimizing for the lowest cost of capital without considering flexibility. A slightly more expensive facility that scales with your revenue usually beats a cheaper one with rigid terms.
We’ve helped brands navigate these decisions alongside their supply chain work. The two are deeply connected: better shipping rates and packaging costs improve your margins, which improve your borrowing terms.
Put this into practice.
Book a 30-minute call and we’ll show you where the margin is hiding in your operations.
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