Well, if a hypothetical business had low overheads, great margins, short turn-around time, unlimited customers, no collections problems etc. you wouldn’t need an investor. A credit line at your bank would provide your seed money, and with the numbers you described, you’d only need that for a short time. You could use your credit card if your margins were good enough.
OTOH if your hypothetical business needed a bigger lump of money up-front to pay for, I don’t know, office space, inventory, advertising, employees, and you didn’t expect to break even for a while, you might want to look for investors.
I think that money used to buy inventory in general is usually called “working capital.” And yes, you can obtain a business line of credit to get working capital.
I’m not aware of a type of business loan that is specifically used to purchase inventory.
The exception is that your suppliers themselves may be willing to help finance your purchases, for example by giving you 60 day payment terms.
I doubt that anyone – even a supplier – would give you an open type setup where you pay nothing until the part is sold. There’s just too much potential for abuse.
But I would suggest you call your suppliers and discuss it with them.
Businesses with a lot of inventory, particularly large items (e.g. a car dealer), often have what is known as “floor financing”, in which a bank or other lender provides loans on the inventory items. The lender has an individual lien against each car or other item of inventory, which is released on sale to the public.
I don’t think that this will work for a small parts inventory, but a general loan for working capital might be what you need. You may also want to check out the small business administration for loans.
I used to work at a similar place, and we had “floor financing” with the vendors. They got paid when we sold the product. They even let us use the financing for the small items like you are talking about provided we also sold the bigger items (computers, printers, copy machines, and to show my age: typewriters)…
What **Billdo ** and **jtgain ** said. Informally this kind of line of credit is called floor plan financing. More broadly, and officially, it’s called asset-based lending.