The cash problem is two-headed, and that is what makes it hard to fund
A growing direct-to-consumer brand spends cash in two directions at the same time, and both happen before any revenue lands. It buys inventory months ahead of demand, often from overseas suppliers on deposit-plus-balance terms. And it spends on customer acquisition, paying Meta and Google to manufacture the demand that will sell that inventory. A traditional lender can get its head around the first half. The second half is where the conversation usually stalls, because there is nothing to repossess at the end of an ad campaign.
This is a different funding question from the seasonal stock build a more conventional retailer faces. The seasonal retailer's cash gap closes when the goods sell through a known peak. The scaling D2C brand has no such tidy cycle: it is deliberately spending ahead of itself to grow, the margins are thin while it does, and the faster it grows the more cash it consumes. Hit a good month and you have to buy more stock and spend more on acquisition to keep the line going up. Growth is the cash problem, not the cure for it.
Why the bank says no, and what fills the gap
The structural issue is assets. A D2C brand's balance sheet is stock, a brand, some customer data, and a Shopify account. There is no plant, no freehold, no debtor book of invoiced trade customers, because the customers are consumers who already paid at checkout. The classic secured products lean on exactly the collateral this business does not have. That is why the bank term loan stalls and why the founder ends up looking at three other routes.
Revenue-based finance is the route built for this shape of business. Providers in this space underwrite from live platform data rather than a secured balance sheet, connecting directly to Shopify, Amazon, Stripe and the ad accounts to read real sales velocity, marketing efficiency and repeat-purchase behaviour. The capital is repaid as a percentage of revenue or as fixed remittances over a set term, with a flat fee on the advance rather than a conventional interest rate, and it is deployed straight into stock and acquisition. The appeal is that it is non-dilutive and fast, and that repayments linked to revenue flex down in a slow month. The cost is real: a fee on every pound drawn, repaid over months, which compounds if you keep refinancing it. It funds a payback cycle; it does not fund a hole.
Inventory and stock finance still has a place, but only against the stock, never against the marketing. If a meaningful share of your cash is locked in goods sitting in a warehouse, financing that stock specifically can free working capital for acquisition without paying a revenue-share fee on the whole requirement. The advance is set by what the stock would recover in a forced sale, which for a young brand with no resale track record is conservative.
Equity is the honest answer when the cash need is not a timing gap but a sustained, multi-year build that debt would only stretch and strain. Consumer-focused funds back D2C brands past proof of concept, and the equity route is right when you are funding the brand itself rather than a specific inventory-and-marketing cycle that pays itself back. The trade is ownership for patient capital that does not demand monthly repayment while you are still investing into growth.
What lenders actually underwrite when there is nothing to seize
For a brand with no hard assets, the lender is underwriting the engine, not the collateral. The numbers that decide your facility are the ones that show your acquisition spend turns into profit fast enough to repay borrowed money:
- Contribution margin after the cost of the product, fulfilment and the acquisition cost of the customer who bought it. Headline revenue growth funded by buying customers at a loss is the fastest way to a declined file. Lenders read the marketing efficiency ratio behind the growth, not just the top line.
- The CAC payback period — how many months of gross margin it takes to recoup the cost of acquiring a customer. A short payback signals a brand that turns ad spend into cash quickly; a long one signals capital that goes in and takes a year to come back, which no revenue-linked facility prices well.
- Repeat-purchase and retention data, because a brand whose customers come back is funding acquisition once and earning several times, while a brand reliant on constantly buying new first-time buyers is on a treadmill the lender can see.
A founder who walks in able to evidence contribution margin and a payback period inside a few months is underwriting a credible engine. One who leads with revenue growth and gross merchandise value is asking a lender to fund vanity metrics, and experienced underwriters in this space price that gap immediately.
Stack the money to the job, do not let one product fund everything
The mistake that quietly kills margin is using a single revenue-based facility to fund the entire requirement, because it is the easy yes. You end up paying a flat fee on the slice of cash that is locked in held stock, where cheaper stock finance would have done, and on working capital that an asset-based lending line could carry if the brand has grown enough to have a balance sheet worth lending against. Once an omnichannel brand develops a wholesale arm, billing retailers on terms, an invoice finance line against those trade debtors becomes available too, and that debtor-backed money is usually cheaper than financing the same gap on revenue share.
The route that holds margin matches each pound of funding to the asset it sits behind: revenue-based finance for the genuinely unsecured acquisition spend, stock finance for the inventory, debtor finance once there are trade debtors, and equity for the structural build that debt should never have been asked to carry. Bedrock places D2C and omnichannel consumer files across exactly these products. Bring the contribution-margin and payback numbers, not the revenue chart, and the conversation starts in the right place.