Inventory Financing for DTC Brands: Real APR by Option

Most DTC founders know they have financing options beyond the bank. The problem is they are comparing a 6% flat fee, a 1.3 factor rate, and an 8% APR as if those numbers live on the same scale. They do not, and the vendors quoting them prefer it that way. This post prices every inventory financing tool as one number, APR-equivalent, for a standardized $500,000 inventory position held over a six-month cycle, so you can pick on cost instead of on whichever brochure had the smallest headline percentage.

The APR problem: why a 6% fee is not 6%

Here is the single most expensive misunderstanding in DTC finance. A lender quotes you a "6% fee." Your brain files it next to an 8% APR line of credit and concludes the fee is cheaper. It is not, and it is not even close.

The conversion is simple: APR equals the fee percent divided by the fraction of a year you hold the money. Formally, APR = fee% / (repayment days / 365). A 6% fee repaid in 90 days is 6% / (90/365), which is about 24% APR. A 6% fee repaid in 60 days is 36.5% APR. The faster the money comes back, the higher the true cost, because you paid the same dollars over fewer days.

When I talk to founders running a brand this size, the pattern we see again and again is that nobody has done this one division. They have three quotes on the desk, all expressed in different units, and they pick the one that "feels" cheapest. Doing the APR conversion on all three, out loud, usually flips the ranking entirely.

Below is every option covered in this post, normalized to APR for the same $500k position. The bar you want to sit at the top is the cheapest, and the one most founders reach for first is nowhere near it.

One structural note before the tour: flat-fee products (Clearco, Wayflyer) charge the same dollars regardless of when you repay, so their APR is a moving target set by your repayment speed. Everything else here (bank LOC, SBA, ABL, Settle) is simple interest, so early repayment genuinely saves you money.

Supplier payment terms: the "free" option that isn't

Before you finance anything externally, the cheapest lever is usually the one already on your P&L: your supplier terms. Every extra day of net terms is a day the supplier is funding your inventory instead of a lender. The pattern we see again and again is that this is the first place a sharp operator looks and the last place a stressed one does.

But "free" terms are rarely free. BCG's June 2024 survey of procurement leaders found suppliers will raise prices 5 to 8% when you push terms 15 to 30 days beyond their norm. And if your supplier offers an early-payment discount you are declining to take, that foregone discount is a real financing cost. The classic 2% 10 net 30 (2% off if you pay in 10 days instead of 30) works out to an implied ~37% APR when you skip it. That is more expensive than most RBF.

So net-60 or net-90 is not a free gift. It is a partial supplier loan with a 15 to 37% implicit APR once you fold in price increases and foregone discounts. That does not make it a bad deal. Supplier-funded inventory needs no application, no personal guarantee, and no field exam, and it is often still the lowest all-in cost if you negotiate it with volume commitments or a longer contract. It just needs to be priced honestly, not treated as if it costs nothing.

Revenue-based financing: Clearco, Wayflyer, and Settle on real APR

Revenue-based financing (RBF) is where most DTC brands actually go for inventory, because it is fast, needs no personal guarantee, and connects straight to your Shopify or Amazon data. The three names you will compare are Clearco, Wayflyer, and Settle. They are not the same product.

Clearco's published invoice-funding tiers are 5%, 6.25%, and 8% flat fees on 4, 5, and 6-month terms, with no early-repayment discount. Pay in month two or month six, you owe the same. Wayflyer charges a single flat fee, commonly cited in the 5 to 10% range, funded in about 24 hours, up to $20M. Settle is the structural outlier: it discloses 12 to 24% APR as simple interest, with no daily percentage of sales and no prepayment penalty.

That flat-fee-versus-simple-interest split is the trap. Because Clearco and Wayflyer charge a fixed fee, a fast revenue sweep that clears the balance early does not save you a dollar, it just compresses the same fee into fewer days and detonates your effective APR.

Deal	Flat fee	Repayment period	Effective APR
Clearco (4-month tier)	5%	120 days	15.2%
Clearco (6-month tier)	8%	180 days	16.2%
Wayflyer (low fee)	6%	90 days	24.3%
Wayflyer (typical deal)	8%	90 days	32.4%
Clearco (fast revenue sweep)	8%	60 days	48.7%

When we have watched founders get this wrong, it is almost always because a strong sales month triggered the sweep, cleared a flat-fee advance in eight weeks, and quietly turned an "8% fee" into a 49% APR loan. Settle's simple-interest model is the opposite: a fast repayment lowers your cost. If you are choosing inside the RBF category and you tend to repay quickly, that structural difference matters more than the headline fee. If you deliberately stretch repayment to the full term, the flat-fee products get more competitive.

To put a ceiling on the range: at normal repayment (four to six months), the effective APR for flat-fee RBF sits in the 16 to 40% band. If a strong revenue month sweeps the balance in 60 days or less, the same flat fee can reach 60 to 73% APR. The "16 to 73%" range in the comparison table is the full sweep across both scenarios; "16 to 40%" is the typical repayment window.

One caution from the founder-call corpus worth flagging: we have seen an RBF provider ask for a share pledge as security on a specific deal. That is unusual for the category and worth reading your term sheet for, because the whole appeal of RBF is that it is non-dilutive.

Purchase order financing: the high-cost tool for a narrow job

Purchase order financing pays your supplier directly against a confirmed customer PO. It is the most expensive per dollar per day of anything here, and it is designed for exactly one situation.

The market-standard structure is about 3% per 30 days on the utilized funds, sometimes 3% for the first 30 days then 1% per 10 days after. On a $50k PO paid off in 60 days, that is roughly $3,000, or 6% of your cost of goods, which annualizes to about 36.5% APR. Fees run 1 to 6% per month across providers, so the range stretches from 18% to well over 70% APR equivalent. Qualification usually requires 25%+ gross margin and, in many cases, an existing factoring relationship.

The decision rule is narrow. PO financing makes sense when you have a confirmed, creditworthy wholesale PO that is too large to fund from your line, your margin clears 25%, and there is no cheaper capital available in the window. It is a way to say yes to a specific order you would otherwise turn down. It is not a way to fund routine DTC inventory buys, and any provider pitching it as one is selling you a 40% APR growth engine.

Asset-based lending, bank lines, and SBA: the graduation path

Once a brand is bankable, the cost of capital drops off a cliff, and the entire game becomes getting bankable as fast as possible. Three tools live here.

Asset-based lending (ABL) borrows against your inventory and receivables, typically 50 to 60% advance on eligible inventory and 75 to 85% on A/R, priced around 7 to 15% APR. The catch is the minimum: most lenders want a borrowing base near $700k to justify the field exams, inventory appraisals, and monthly borrowing-base certificates. That said, inventory-only ABL is emerging as a standalone product, with at least one lender recently extending a $2M inventory-only line to an early-stage online retailer. Watch the covenants: we have seen a fixed-charge coverage ratio covenant set at 1.1x that a growing brand did not always clear.

A traditional bank line of credit is the cheapest recurring option once you qualify, at roughly 7 to 15% APR, with the KC Fed Q2 2025 survey putting the median new LOC at 7.16 to 8.08%. It usually wants two-plus years of history, $250k+ in revenue, and a debt-service coverage ratio around 1.2x. SBA 7(a) is cheaper still, at 9.75 to ~13.25% APR as of July 2026 (prime at 6.75% plus the SBA maximum spread of up to 6.5% on the smallest loans, stepping down to 3.0% on loans over $350k), up to $5M and 10-year terms, but it is the slowest to fund and the heaviest on paperwork.

Note: this chart prices a $500k position held for the full six months. At a full-term hold, Clearco and Wayflyer's flat fees (~$40k) edge out Settle's simple-interest cost (~$45k). Settle's cost advantage shows up on early repayment: if you clear the balance in 60 to 90 days, Settle's accruing interest stops while Clearco and Wayflyer's flat fee does not change.

Here is the same $500k position across the full menu, priced two ways: as an all-in APR range and as real dollars out the door over six months.

Option	All-in APR range	Advance / size	Time to capital	Best scenario
Supplier terms (net 60/90)	15 to 37% implicit	Your existing inventory cost	0 to 30 days	Lowest cost if negotiated; no cash outflow
Bank line of credit	7 to 15%	$10k to $500k+	2 to 4 weeks	Cheapest recurring funding once bankable
SBA 7(a) loan	9.75 to ~13.25%	Up to $5M	30 to 90 days	Cheapest long-term capital; not for urgency
Asset-based lending	7 to 15%	50 to 60% of inventory	3 to 6 weeks	Large, fast-moving inventory; ongoing facility
Settle (RBF)	12 to 24% disclosed	$20k to $15M	Hours	Simple interest; early repayment saves money
Wayflyer (RBF)	16 to 60% equiv	$5k to $20M	24 hours	Daily % of sales buffers revenue troughs
Clearco (invoice funding)	24 to 73% equiv	$10k to $2M	24 hours	Fastest DTC advance; 4 to 6 month schedule
PO financing	18 to 72% equiv	Up to 100% of supplier cost	2 to 4 weeks	Large confirmed wholesale PO only

The cheapest inventory financing is almost never the one with the smallest headline percentage. It is the one you can qualify for. Do the one division that turns every fee into an APR, and the ranking usually inverts: the "6% fee" beats the "8% APR" only in the brochure.

Decision framework: which tool for which brand

The right tool is mostly a function of how bankable you are, which tracks with revenue. Here is the map we walk founders through.

Pre-revenue to about $250k MRR: you are not bankable yet, so your realistic menu is negotiated supplier terms first, then RBF (Settle if you repay fast, Clearco or Wayflyer if you stretch to term) for the inventory gap. Accept that you are paying 16 to 40% APR for speed, and make it temporary.

$250k to $1M MRR: this is the graduation window. Start the bank-line and SBA conversations now, before you need the money, because both take weeks. Use RBF only for surges you cannot wait out. If you are carrying real inventory and receivables, price an ABL line.

$1M+ MRR: you should be predominantly bank-funded, with a revolving LOC or ABL facility as your inventory workhorse and RBF reserved for one-off spikes. In practice the blend is common: we have seen a $25M-inventory brand run roughly half vendor-financed and the rest on ABL. The through-line at every stage is the same. Founders at this size tell us the real trap is "never having cash even when profitable," because inventory eats the balance sheet while the P&L looks green. Shortening the cash conversion cycle, getting off 250 days of inventory toward the 90 to 120-day DTC norm, frees more liquidity than any financing product will. If that is where your cash is stuck, our interim CFO services exist to run this exact tradeoff with you.

Sources and methodology

Bank and small-business loan rates from the Federal Reserve. Median new line-of-credit rates (7.16 to 8.08%) and term-loan rates come from the Kansas City Fed Q2 2025 Small Business Lending Survey, published September 2025. Application-channel and satisfaction context is from the Federal Reserve 2024 Small Business Credit Survey of employer firms.

SBA 7(a) rate caps. Maximum spreads over prime by loan size are from the SBA 7(a) terms and eligibility page: Prime + 6.5% on loans up to $50k, stepping down to Prime + 3.0% on loans over $350k. At the July 2026 prime rate of 6.75%, this gives a ceiling of ~13.25% (smallest loans) and a floor of 9.75% (largest loans); verify the live prime rate before acting, as it moves with Fed policy.

RBF pricing from lender pages and third-party reviews. Clearco invoice-funding tiers (5% / 6.25% / 8% on 4/5/6-month terms) are from Clearco's published invoicing structure. Wayflyer's fee range and 24-hour funding are cross-checked against the Finder Wayflyer review (May 2026). Settle's disclosed 12 to 24% APR and simple-interest structure are from Settle's published comparison pages.

Supplier-term costs. The 5 to 8% price increase for stretched terms is from BCG's June 2024 analysis of procurement leaders. The 36.7% implied APR on a foregone 2% 10 net 30 discount is a standard cost-of-trade-credit calculation.

PO financing and ABL benchmarks. PO financing's roughly 3% per 30 days and ABL's 50 to 60% inventory advance rate and 7 to 15% APR range are drawn from published lender materials (CapFlow, Gibraltar Business Capital, 1st Commercial Credit). The $500k dollar-cost figures are illustrative, built on these published rates and the APR conversion framework rather than any single brand's quotes.

Operator context. Anonymized patterns (share-pledge requests, FCCR covenants, the roughly half vendor-financed / half ABL blend, and the cash-conversion-cycle drag) reflect what we see across founder conversations, with no brand identified.

Frequently asked questions

what does inventory financing actually cost on an apr basis, not just the fee they quote me?

Convert the fee to APR with fee percent divided by (repayment days / 365). A 6% fee repaid in 90 days is about 24% APR, not 6%. That single conversion is the whole game. A bank line of credit sits around 8% APR, revenue-based financing lands at 16 to 40% depending on repayment speed, and purchase order financing runs 18 to 72%.

how do i compare clearco vs wayflyer vs settle when they all look the same?

The structure differs. Clearco and Wayflyer charge a flat fee, so repaying faster raises your effective APR (you pay the same dollars over fewer days). Settle charges simple interest, so early repayment actually saves you money. Settle discloses 12 to 24% APR; Clearco and Wayflyer land anywhere from 16 to 73% APR depending on how fast the revenue sweep clears the balance.

can i get an sba loan for inventory if i run an ecommerce brand?

Yes, the 7(a) program covers inventory and working capital up to $5M, and SBA Express goes up to $500k faster. As of July 2026 the rate caps are 9.75 to ~13.25% APR (prime 6.75% plus the SBA maximum spread, which tops out at 6.5% on the smallest loans), the cheapest disclosed cost of any option here. The tradeoff is speed and paperwork: expect 30 to 90 days, a personal guarantee, and heavy documentation. It is not the tool for a seasonal urgency.

when does purchase order financing make sense for a dtc brand?

Almost never for routine DTC restocks. It runs 18 to 72% APR equivalent, so it only pencils when you have a confirmed wholesale PO from a creditworthy buyer, 25%+ gross margin, and no cheaper way to fund it. Treat it as a one-off margin tax to capture a specific order, not a growth tool.

is the free supplier net-90 extension really free or am i paying for it somewhere?

You are paying for it. BCG found suppliers raise prices 5 to 8% when you push terms 15 to 30 days beyond their norm, and any early-payment discount you give up (a 2% 10 net 30 is an implied ~37% APR) is a real cost. Net-60/90 is a partial supplier loan. Model it as one before you assume it beats a bank line.

what is asset-based lending and does my brand have enough inventory to qualify?

ABL lends against your inventory and receivables, typically 50 to 60% of eligible inventory and 75 to 85% of A/R, priced around 7 to 15% APR. Most lenders want a borrowing base near $700k to make the field exams and monthly certificates worth it, though inventory-only lines are appearing lower. If you are under roughly $5M in revenue you usually will not clear the minimum yet.

what's the cheapest way to fund a $500k inventory order without giving up equity?

In order: negotiated supplier terms, then a bank line of credit (about 8% APR), then SBA or ABL if you are bankable. On a $500k position over six months a bank LOC costs roughly $20k versus $40k to $45k for revenue-based financing and about $45k for PO financing at 3% per 30 days over 90 days. The RBF speed is real, but you are paying 2x for it.

when should i use a bank line of credit instead of rbf for inventory?

Whenever you can qualify and you are not racing a deadline. A revolving bank line is the cheapest recurring inventory funding once you have roughly two years of history and clean financials. Use RBF for the gap before you are bankable or for a one-time surge you cannot wait two to four weeks to fund. Graduate off RBF the moment a bank will have you.