Inventory financing is money you borrow, or credit you take, to buy stock before your customers pay for it. Supplier credit, bank and SACCO loans, loans secured on the stock and mobile loans all do the job. Compare them as a yearly cost, because a fee per month or per loan hides the real price.
This guide prices seven ways to pay for stock with Uganda's and Kenya's latest lending rates and lenders' own published fees. It then costs one UGX 20,000,000 stock order five ways, so you can see which money is cheap and which is dear.
Seven ways to pay for stock, compared
The cheapest money for stock usually comes from your supplier, and the dearest from a mobile loan. The table puts each way on the same footing: what it costs in a year.
| Way | How it works | Yearly cost | Suits |
|---|---|---|---|
| Supplier credit | Pay 30 to 60 days after delivery | Free, unless you give up a discount for paying early: 2% for paying in 10 days instead of 30 is 37.2% | Regular stock from a supplier who knows you |
| Consignment | The supplier owns the goods until they sell | No interest; you pay only for what sells, at the agreed price or commission | New or uncertain lines |
| Bank overdraft or short loan | A limit or a loan at the bank's rate | Averages of 17.32% in Uganda (July 2026) and 14.4% in Kenya (September 2026), plus fees | Seasonal builds and steady sellers |
| SACCO or microfinance loan | A loan from your SACCO or a licensed lender | Set by each lender; ask for the total cost of credit in writing | Members without bank security |
| Loan secured on the stock | The stock itself is the lender's security | Agreed with the lender, plus checks and fees | Wholesalers and distributors with large, easily sold stock |
| Warehouse receipt finance | A receipt for produce in a licensed warehouse secures a bank loan | Agreed with the bank | Traders in maize, coffee and other produce |
| Mobile loan | A short loan paid into your mobile money wallet | 9% for 30 days is about 110%; 2.5% for 7 days is about 130% | A few days' cash for stock that sells fast |
The next section shows how each yearly figure is worked out. Your own bank's rate depends on your security, your record and the loan.
How to turn any offer into a yearly rate
Price every offer as a percentage a year before you compare them. Three conversions cover most of what lenders and suppliers quote.
- A fee per loan: fee × 365 ÷ the loan's days. A 9% fee for 30 days is 9 × 365 ÷ 30 = 109.5% a year.
- A rate per month: monthly rate × 12. A rate of 2% a month is 24% a year, before fees.
- A discount you give up: discount ÷ (100 − discount) × 365 ÷ the extra days of credit. For 2% off in 10 days or full price in 30, that is 2 ÷ 98 × 365 ÷ 20 = 37.2% a year.
The flat-rate trap
A flat rate charges interest on the whole loan for the whole term, even after you have repaid most of it. That makes it far dearer than it sounds.
For example, UGX 10,000,000 over 6 months at 2% a month flat costs UGX 1,200,000 in interest, repaid at UGX 1,866,667 a month. On the money you actually hold, that is about 3.3% a month, or 40% a year, not 24%.
In Uganda, UMRA regulates SACCOs, non-deposit-taking microfinance institutions and money lenders. Before you sign, they must explain how they calculate interest and state the total cost of credit, fees included (UMRA, consumer protection guidelines).
One stock order, funded five ways
For example, a household goods shop in Kampala needs UGX 20,000,000 of stock for the December season. It expects to sell it within 60 days for UGX 26,000,000, a gross profit of UGX 6,000,000. The figures are illustrative.
| Way | Calculation | Cost (UGX) | Share of the gross profit |
|---|---|---|---|
| Supplier credit for 60 days, no discount offered | None | 0 | 0% |
| Supplier credit, giving up a 2% discount for cash on delivery | 20,000,000 × 2% | 400,000 | 6.7% |
| Bank overdraft at 17.32% a year | 20,000,000 × 17.32% × 60 ÷ 365 | 569,425 | 9.5% |
| SACCO loan at an example rate of 2% a month | 20,000,000 × 2% × 2 | 800,000 | 13.3% |
| Mobile loans at 9% per 30 days, if a limit were that high | 20,000,000 × 9% × 2 | 3,600,000 | 60.0% |
The supplier's money is the cheapest here, even when it costs a discount. Giving up 2% for 60 days of credit is 12.4% a year, below the bank's rate.
Time changes the answer. If the stock takes 120 days to sell, the overdraft costs UGX 1,138,849 and the SACCO loan UGX 1,600,000, double the 60-day figures.
Supplier credit and consignment: ask your supplier first
Credit terms of 30 to 60 days cost nothing unless the supplier offers a discount for paying early. If it does, that discount is your interest rate.
Take the discount when it beats your borrowing rate. Giving up 2% for 20 days' credit costs 37.2% a year, so a shop with an overdraft near 17% should borrow and pay early.
On consignment, the supplier keeps ownership until the goods sell, and you pay only for what sells. Consignment inventory covers the terms to agree, and inventory purchasing covers negotiating with suppliers.
Bank, SACCO and stock-secured loans
A bank overdraft suits a seasonal build: you draw on it as you buy and repay as you sell. Uganda's banks averaged 17.32% a year on shilling loans in July 2026 (Ministry of Finance, Performance of the Economy).
Kenya's banks averaged 14.4% in September 2026 (Central Bank of Kenya, October 2026). Your own rate depends on your bank, your security and your record.
A loan in dollars looks cheaper: Uganda's foreign-currency loans averaged 7.76% in July 2026. If you sell in shillings, a weaker shilling raises what you owe, and the saving can vanish.
Loans secured on stock
A loan secured on stock uses the goods themselves as collateral. In Uganda, lenders register that claim in SIMPO, the movable property registry at URSB. Its guide lists inventory among the assets a borrower can pledge (URSB, SIMPO information guide).
Anyone can search SIMPO free by the borrower's name, so check what is already registered against a business before you deal with it. The register also shows a later lender that your stock is pledged.
A lender advances only a share of the stock's value, because it would have to sell the goods cheaply if you defaulted. Lenders usually value finished goods that sell easily above raw materials or work in progress; types of inventory explains the difference.
Warehouse receipts for produce
Traders in maize, coffee and other produce can borrow on a warehouse receipt. Uganda's warehouse receipt system lets produce stored in a licensed warehouse secure a bank loan (Ministry of Trade, Warehouse Receipt System).
Mobile loans: fast, small and dear
Mobile loans arrive in minutes and are priced per loan, not per year. MTN Uganda's MoKash FAQs list a 9% fee for a 30-day loan of up to UGX 3,000,000, depending on your limit.
MTN Uganda's loan for MoMoPay merchants charges 2.5% for 7 days or 6.5% for 21 days, on up to UGX 10,000,000. The lender decides from your mobile money history and your credit record.
As yearly rates, those fees run from about 110% to 130%. They suit stock that sells within the loan's term. On stock that sits for months, each rollover adds another fee while the goods earn nothing.
For example, UGX 2,000,000 for 7 days at 2.5% costs UGX 50,000. If that stock sells within the week for UGX 2,500,000, the fee takes a tenth of its UGX 500,000 gross profit.
When financing stock pays, and when it doesn't
Borrow for stock only when it will sell before the loan is due, at a margin wide enough to carry the cost. Five rules keep the cost below the profit.
- Finance fast sellers and seasonal peaks that sold through last year. Your sales records show how fast each line went.
- Don't finance slow or dead stock. Interest keeps running while it sits, on top of the costs in inventory holding cost.
- Match the term to the sales. A line that sells in 60 days needs 60 days of credit, not 30 days and a rollover.
- Repay as you sell. Pay the loan down from each week's takings, not in one sum at the end.
- Test a bad month. Check you could still repay if sales came in a fifth below your plan.
Before borrowing at all, free the cash already sitting in slow stock and customer credit. Inventory and cash flow shows how much a few days off the cash cycle frees.
What lenders ask for, and where to find it in ArmPOS
Lenders want proof that your stock sells and that you can repay: sales history, stock records, supplier balances and bank or mobile money statements. ArmPOS doesn't lend money or arrange loans, but it keeps the records a lender asks for.
- Sales history. Reports › Sales Report lists every sale in a period, with what is paid and due, and exports to PDF or Excel (Sales reports).
- Your profit. Reports › Profit and Loss gives revenue and net profit for any period, branch by branch (Reports to check every day).
- Stock and its value. Inventory Valuation multiplies each product's stock on hand by its cost and totals it. The Stock Aging Report shows how long it has sat (Stock reports).
- Proof the stock is there. Regular counts, corrected with adjustments on record, show a lender the figures match the shelves (Count and adjust stock). A stock take before you apply is worth the day.
- What you owe suppliers. The Suppliers Report shows each supplier's Total Purchase Due (Customer and supplier reports).
Most of these reports print or save as a PDF, so shops in Uganda and Kenya can hand them to a bank or SACCO.
Frequently asked questions
What is inventory financing?
Money borrowed or credit taken to buy stock, repaid as the stock sells. It can be supplier credit, a bank or SACCO loan, a loan secured on the stock, or a mobile loan.
Can a small shop get an inventory loan?
Yes. A bank, SACCO or mobile lender looks at your sales history, your statements and your credit record. Some also take the stock as security.
Is supplier credit really free?
Only when there is no discount for paying early. If there is one, the discount you give up is the price: 2% for 20 days of credit is 37.2% a year.
What happens if the stock doesn't sell?
You still owe the loan and its interest. On a loan secured on stock, the lender can take the goods under the agreement, so read that clause before you sign.
How much can I borrow against my stock?
A share of its value, set by each lender, and lower for goods that spoil or go out of date. Ask each lender for that share and every fee in writing.
Before your next big order, price three ways to pay for it with the formulas above, and start with your supplier. To keep the sales, stock value and supplier balances a lender asks for, create a free ArmPOS account.
