Inventory financing for hardware DTC without crushing margin

How it works: a traditional credit facility, drawn as needed, repaid on terms.

Realistic cost: in 2026, prime + 2-5% (i.e., ~9-12% APR depending on credit). Much cheaper than revenue-based financing in true APR terms.

Best fit when: you have 12+ months of operating history, decent credit, and ideally some accounts-receivable to lend against. The facility is most useful for the predictable working-capital gap, less useful for opportunistic large orders.

The catch: most US/UK banks don't really want to lend to a 12-month-old DTC startup, even a profitable one. You'll get rejections from the big banks; community / regional banks are more flexible. Online lenders (BlueVine, Bluevine, Fundbox) sit in between bank pricing and revenue-based-financing pricing.

Path 3 — Supplier-side payment terms

How it works: negotiate Net-30 / Net-60 / Net-90 terms with your suppliers, so you don't pay COGS upfront — you pay 30/60/90 days after the goods are delivered.

Realistic cost: $0 in financing fees. The supplier typically marks up the unit cost ~3-8% to compensate for the payment delay, or asks for it on subsequent orders once the relationship is established.

Best fit when: you have an established relationship with the supplier (typically 3+ orders) and the supplier has the cash-flow strength to extend terms. Smaller suppliers can't; larger ones often will.

How to ask: at the start of an order discussion (not after the order is placed), ask: "What payment terms can you offer if we commit to a 12-month volume?" The combination of volume commitment + relationship is what unlocks Net-30/60. First-time orders are almost always 30-50% deposit, balance on shipping.

What founders usually try first (and why it usually breaks)

• Personal credit cards. Common at the very start. Becomes a problem above $20-30k because the personal liability is on the founder, the cost is APR 18-29%, and credit-utilisation ratio destroys the founder's personal credit score.
• Friends-and-family loans. Fine in small amounts ($5-25k) as a stopgap. Becomes a problem when you can't repay on the promised timeline and the relationship sours.
• A small priced equity round to cover working capital. Most expensive path. You're trading 5-15% of the company permanently to solve a 6-month cash-flow gap. Avoid unless you're also raising for a growth purpose.

The realistic financing stack at $500k-$2M revenue

A hardware DTC business at this revenue range typically uses a stack:

• Net-30 or Net-60 with the main 2-3 suppliers (free, hard-won).
• A revenue-based financing facility for opportunistic large orders (faster than bank financing, accepts non-conventional underwriting).
• A small bank line of credit for the predictable working-capital trough (cheapest cost when you can get it).

Total cost of capital across this stack: ~6-10% blended. Workable for any product with 40%+ contribution margin.

What to do today

1. Compute the actual cash-flow gap in your current cycle. Most founders' estimates are wrong by 30-50%.
2. Ask your top 3 suppliers about payment terms next time you order. The conversation costs nothing; the worst answer is "no."
3. Only after the supplier conversation, evaluate revenue-based financing vs bank credit. Get quotes from 2-3 in each category. The all-in cost (including effective APR) varies more than founders expect.
4. Avoid personal liability and dilution as financing paths for working capital. Reserve those for growth investments.