A small business doesn't always have the cash available to fill orders. Rejecting orders leads to speculation about how well the business is doing. Potential customers may start to think the company is unreliable and do business with a competitor instead. Rather than turning down the order, the business owner may decide to borrow money to buy inventory.

Purchase Order Financing

Lenders offer purchase order financing for inventory purchases based on customer orders being in place. The order can only be returnable if the merchandise is defective and may have to be above a minimum dollar amount. Apply for the loan from the purchase order lender. Show documentation that you have an order. Calculate what materials you need to fill that order and from which suppliers. Send the information to the purchase order lender, which pays the supplier directly. The lender collects the invoice from the customer when the order has been shipped and pays you after the purchase order financing fees have been paid. Your personal credit or your company's credit history is not the determining factor in granting the purchase order financing -- it's the customer's credit.

Vendor Financing

Some vendors will provide their customers -- that's your business -- with payment terms of up to 90 days. In effect, you're borrowing from the vendor for the length of the term agreement. There may be no interest charged for the term. However, if you pay within 15 days you get a discount on the amount due. For example if you buy $50,000 of inventory and the terms are 90 days with a discount of 3 percent if you pay within 15 days, you pay only $48,500 if you settle the debt early. Waiting 90 days to pay costs you $1,500. Ask the vendor if you qualify for longer payment terms. If you've always paid on time, the answer should be yes. If it's no, see if there are other vendors that do offer terms.

Bank Loan

A traditional bank loan can also fund inventory purchases. Calculate how much money you'll need. Look at your credit report and clean up any mistakes. Even though it's a loan to your business, your personal credit history will most likely be reviewed. Complete the loan application and submit to the bank. The bank may also require several years of financial statements and ask to see your business plan for the next few years. Demonstrate that the company will have the funds to pay the loan back in a timely manner.

Personal Assets and Credit

Review your personal assets and credit lines to see what's available. You may be able to refinance your home, establish a home equity line of credit on the property or as a short-term strategy purchase inventory with your credit cards.

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