For most product businesses the growth ceiling is no longer demand. It is the cash sitting in stock that has not sold yet. Companies are deliberately holding more inventory because tariffs, supplier switches and unpredictable lead times have made lean sourcing risky, and every extra day of stock on hand is working capital that cannot be spent on anything else.
That is the trade nobody put on a slide: resilience was bought with cash flow. A brand can grow 40%, hold its margins, and still spend the year fighting its own bank balance.
This article breaks down where the cash actually goes between paying a supplier and collecting from a customer, why the shift to just-in-case made that gap wider, and how inventory finance changes the arithmetic instead of just funding it.
Why is inventory suddenly eating more cash than it used to?
Because the operating model changed. Just-in-time assumed predictable shipping, stable costs and reliable suppliers. Once tariff policy started moving in months rather than years, that assumption broke, and companies moved to just-in-case: bigger safety stock, more suppliers, longer planning horizons.
The behaviour change is measurable. Netstock's 2026 Tariff Impact Report found 73% of SMBs have extended their inventory planning time horizons, and more than half report the tariff impact on their supply chain is greater than it was 12 months ago, with over 20% calling it much greater. Sourcing has fragmented too: roughly 35% of SMBs switched suppliers in the past year and close to half now source from multiple regions.
Multi-region sourcing sounds prudent, and it is. It also means smaller order quantities per supplier, more shipments in transit, and safety stock held in more places at once. Every one of those is cash.
Even excess stock has been reframed: 30% of SMBs now classify part of their excess inventory as a strategic hedge against disruption. Warehousing followed, with utilisation above 90% in major logistics corridors as businesses front-load imports ahead of tariff increases.
The financing side has noticed. The Asian Development Bank's latest Global Trade Finance Gap Survey puts the shortfall at $2.5 trillion in 2025, around 10% of global trade, and eight in ten banks surveyed expect demand for financing and guarantees to climb, driven by supply chain realignment. Demand for inventory funding is rising precisely because everyone is holding more of it.
Where does the cash actually go?
Follow one order through the chain: supplier, inventory, 3PL, sale, cash.
You pay the supplier at production or before shipment. The goods spend five to six weeks on the water. They land, clear customs, and sit at a 3PL until they sell. Then, depending on your channel, cash arrives instantly (DTC) or 30 to 60 days later (wholesale and retail).
The metric that captures this is the cash conversion cycle:
CCC = DIO + DSO − DPO
Days inventory outstanding, plus days sales outstanding, minus days payable outstanding. It is the metric that bridges your P&L and your bank balance: you can have strong gross margins, growing revenue, and still run out of cash because your CCC is too long for your growth rate.
Two of those three levers barely move for an importing SME. You cannot stretch DPO much, because Asian manufacturers want a deposit at order and the balance before the container ships. DSO is set by your channel mix, not by your intentions.
So DIO carries everything. And DIO is exactly the number just-in-case is designed to increase.
What does thirty extra days of stock actually cost?
Here is the calculation most brands never run.
Take a European consumer brand doing €4M revenue at 60% gross margin, so €1.6M of COGS. Every single day of inventory on hand ties up €1.6M ÷ 365 = €4,384.
Move from 90 days of stock to 120 days, which is roughly what a shift to just-in-case looks like in practice, and you have permanently parked another €131,500 in the warehouse. Not spent, not lost, just unavailable. No sales meeting, no marketing channel and no pricing decision produces that number as fast as an inventory policy change does.
Now compare three scenarios for the same business, with DSO at 20 days and DPO at 5:
| Lean sourcing | Just-in-case, self-funded | Just-in-case with Stock & Release | |
|---|---|---|---|
| Days of stock on your books | 90 | 120 | 25 |
| Cash locked in inventory | €394,500 | €526,000 | €109,600 plus deposit |
| Cash conversion cycle | 105 days | 135 days | 40 days |
The middle column is where a lot of otherwise healthy brands are sitting right now. They did the responsible thing operationally and quietly took on a six-figure working capital commitment to do it.
How does inventory finance change the cycle rather than just fund it?
A loan does not change your cash conversion cycle. It borrows against it, at a cost, with the stock as collateral and the debt on your balance sheet whether the goods move or not.
The purchase-resale model works differently. OceanX buys the goods from your supplier and resells them to you, so the inventory is not yours until you take it.
Open Credit: we pay the supplier, the goods ship straight to you, and you pay us back in installments across the agreed term. In cash conversion terms, that is a straight extension of DPO. Your supplier gets paid on day one and you pay on a schedule your Asian manufacturer would never have offered.
Stock & Release: we pay the supplier and the container ships to our 3PL in Venlo. You release stock in batches and pay a fixed per-unit price at each release. The per-unit price is locked at deal start based on the term you choose, so releasing in week two or in month four costs exactly the same per unit. A deposit at purchase order acts as security and effectively covers the last portion of the inventory, which means the tail can be released without further payment.
That second structure is the one that matches the just-in-case problem, because it separates two things that used to be welded together: how much stock exists, and how much stock you have paid for. Your buffer sits in Venlo, insured and ready, while your balance sheet only carries what you have actually pulled.
Practical note from our side of the table: with sea freight and customs, terms below three months are not workable. Three or four months is where these deals actually land.
Is holding more inventory even the right call?
Not across the board, and this is where a lot of 2026 supply chain advice is lazy. Buffering everything is just as unthinking as buffering nothing.
The stock worth holding is the stock where a stockout is expensive and resupply is slow: proven SKUs, long lead times, single-source components, anything hit by tariff timing. The stock not worth holding is the new SKU with two months of sales history and an optimistic forecast attached.
Financing amplifies whatever discipline you already have. Fund a proven bestseller and you convert cash into growth. Fund a forecasting problem and you have simply bought more of it, on someone else's terms. We have declined deals for exactly that reason, and we would rather say it before the container leaves than after.
The brands handling this well ran their own version of the €4,384-per-day calculation, decided which SKUs deserve the buffer, and arranged the funding before the reorder became urgent. The ones struggling are still treating inventory as an operations decision when it has become the single largest financing decision they make each year.
FAQ
What is a cash conversion cycle and why does it matter for inventory?
The cash conversion cycle is days inventory outstanding plus days sales outstanding minus days payable outstanding. It measures how long your cash stays locked between paying a supplier and collecting from a customer. For importing brands, inventory days dominate the calculation, so stock policy effectively sets your working capital need.
Why do profitable, growing companies run out of cash?
Because growth consumes working capital faster than sales replenish it. Each reorder is larger than the last, and the cash from the previous order has not fully landed yet. Strong margins on the P&L say nothing about timing, and timing is what empties the bank account.
Does holding more inventory always hurt cash flow?
It always consumes cash, but that can be the right trade. A stockout on a proven product costs margin and marketplace ranking, which can exceed the carrying cost. The discipline is segmenting: buffer the SKUs where resupply is slow and stockouts are expensive, stay lean elsewhere.
How does Stock & Release shorten the cash conversion cycle?
The goods are bought and held by OceanX at our warehouse in Venlo, so they are not on your books until you release them. Your inventory days shrink to the period between release and sale, which cuts the cash tied up while the physical buffer stays fully available.
Is inventory finance a loan?
No, in the purchase-resale model. OceanX buys the goods from your supplier and resells them to you on agreed terms, so there is no loan agreement and no debt for stock you have not yet taken. Loan-based inventory financing exists separately and works on collateral instead.
Want to know what your cash conversion cycle looks like with the stock financed instead of owned? Book a 20-minute call and we will run it on your actual numbers: meetings.hubspot.com/arjo-huijbregts
Arjo Huijbregts is Business Development Europe at OceanX AI. He structures inventory and trade finance deals for consumer brands across Europe.