WHAT'S IN THIS GUIDE
Cash is the lifeblood of any business, and wholesalers and distributors are no different. Because retailers often pay days (or even months) after orders are delivered, managing cash flow in the interim is vital. Without cash flow, your business suffers.
Besides, wholesale payment terms are not always as straightforward as B2C terms, where customers pay upon receiving a product. B2B customers will often delay payments to give themselves the time to make a sale and pay you back.
These delayed payments can stifle cash flow, and without financing options for small businesses, like distributor invoice factoring or wholesale invoice factoring, your company may be forced to require stricter payment terms or raise prices on your products. Neither solution fosters good customer relationships.
Along with revenue-based and equipment financing loans, there are four other common types of loan options for small businesses.
When a business needs capital to grow, a lender provides a lump sum of money at a fixed interest rate to be repaid over a set length of time—called repayment terms. Business loans are usually for higher amounts than personal loans.
A business line of credit can be secured or unsecured. It works a lot like a credit card. Your business draws money as needed, and only pays interest on the amount borrowed. Once paid off, you can borrow against the line of credit again.
Working capital loans are short-term loans to be used to cover things like rent, payroll, and cover immediate expenses. Working capital loans should not be used as long-term options as interest rates can be higher than with other funding options.
For wholesale businesses that may not qualify for a term loan, an SBA loan might be a good option as up to 85% of the loan amount is guaranteed by the Small Business Administration rather than a bank or other financial institution.
If you’re a start-up or have little credit history, it can be challenging to qualify for a loan. If you’re a growing business, oftentimes you need working capital quickly to fund big projects. Wholesale invoice factoring can be a practical option.
Wholesalers are always looking for ways to increase productivity and improve efficiency. However, because their customers can often take weeks or months to pay, it becomes difficult to retain the resources necessary to grow your business.
Wholesalers also (as a rule) buy excess inventory, which further decreases working capital. Dealing with shifting demand and seasonality further complicates cash flow.
Wholesale lending, in the form of wholesale invoice factoring, is designed to address the capital expenditures and cash flow cycles of wholesalers. In addition to meeting both short-term and long-term needs, invoice factoring for wholesale distributors can bridge the gaps in revenue until your customers’ invoices are paid.
With invoice factoring for wholesale distributors, your unpaid accounts receivable are purchased by a factoring company, like FundThrough. After checking the creditworthiness of your customers, you are advanced up to 100 percent of the invoice amount less a fee. Upon approval, funds can be available as soon as the next business day.
No more processing invoices or chasing down payments. You get immediate cash in hand.
Distributor invoice factoring also simplifies your bookkeeping experience and helps you get paid on time every time. FundThrough remits the balance, minus a small transaction fee, and waits for your customer to pay the bill. Factoring companies may also offer other forms of funding, such as accounts receivable financing.
In the past, factoring was largely misunderstood. Business bank loans and lines of credit were the traditional and accepted forms of financing, along with credit cards. Each of these different funding options have pros and cons to consider.
Costs for a new or growing business can be significant. You may need to purchase equipment and inventory, pay employees, and keep up with rent, taxes, and marketing. You may consider taking out a business loan.
A line of credit (LOC) is a lot like a credit card. You can borrow/withdraw money up to a certain maximum amount determined by your financial institution. You can cover day-to-day expenses and pay back your debt, only to borrow again when needed.
Like all forms of funding, business credit cards must be used wisely or things can go sideways very quickly.
Invoice factoring is not a loan. The application process is quick, there is no repayment obligation, no high interest rates, and no debt to record on your wholesale company’s balance sheet. Plus, many more companies will qualify.
Choosing a wholesale factoring partner is a lot like choosing any lender. It pays to do your homework. There are also several questions to ask prior to starting the application process:
Most factoring companies work with most industries, but not all. Some factors specialize in only a few industries.
FundThrough works with wholesale providers.
Advance rates can range from 60% to 100%, depending on the factoring company and sometimes the industry.
FundThrough advances 100% off the invoice amount, less a fee.
A factoring company should be able to provide what factoring fees it charges upfront. But some companies may make it difficult to determine the total costs of using their service. FundThrough offers transparent pricing so you know prior to signing an agreement.
FundThrough pricing – 100% advance rates minus a flat fee. One upfront price.
A minimum is the amount you must factor every period (month, each quarter or every year). Some factoring companies offer plans that require minimums, while others do not.
FundThrough doesn’t require minimums. Only fund when you need to.
Cash flow is the number one problem for most start-ups and small businesses, especially if they’re growing. This is also true for wholesale companies. Invoice factoring companies typically consider several situations before offering you an advance.
Factoring invoices is a sound financial strategy if you—
FundThrough takes the legwork out of accounts receivables financing. It’s fully automated platform is easy to navigate, it’s fee structure is transparent and a customer service rep is there when you have questions. Find out what FundThrough’s clients have to say, and start factoring your invoices today.
Interested in possibly embedding FundThrough in your platform? Let’s connect!