Some of the risks of inventory financing include the following: A lengthy underwriting process. The process of inventory financing involves meeting with auditors, compiling records, and valuing inventory – all of which can be lengthy and expensive. Inventory financing can be difficult to obtain. While it’s generally easier to get than traditional business financing, inventory financing isn’t always the easiest alternative financing to qualify for. Your unsold inventory is used to qualify, but if you’re having a hard time selling your inventory, potential lenders would likely have the same problem. This makes them hesitant to approve your application. At least two years of business history. Lenders check your business history to see if you can sell inventory quickly with a solid profit margin. If you’re a startup or have been in operation for less than a year, you may need to check out other alternatives. You could lose your inventory. If you default on the loan, the lender will liquidate your inventory so they don’t get stuck with outdated items that are hard to sell. In other words, they will seize and sell your inventory to get their money back.