Wholesale Invoice Factoring

Speed up your cash flow without taking on debt

If you’re a business owner or entrepreneur looking for a flexible financing solution to improve cash flow, streamline operations, and boost growth, wholesale invoice factoring could be a solution. But with so many funding options out there, how do you know if wholesaler factoring is right for your business? This guide offers a comprehensive overview of everything you need to know about invoice factoring for wholesalers to help you decide if it’s right for you, as well as tips for choosing the right factoring company for your specific needs.

Wholesale Payment Terms: The Problem With Waiting 30+ Days to Get Paid

Many wholesale companies offer net terms to their customers, meaning you’re stuck waiting 30, 60, or even 90 days or more for payment from retailers. While net terms can provide flexibility and convenience for buyers, waiting to get paid on outstanding invoices is challenging for suppliers. As entrepreneurs ourselves, we understand how stressful this can be!

 Because retailers often pay months after orders are delivered, your business can end up without adequate cash flow. This makes it difficult to cover everyday business expenses like payroll and marketing. It also makes it tricky to purchase more products to supply both new and repeat customers.

Without financing options for small businesses such as distributor invoice factoring or wholesale invoice factoring, your company may be pressured to enforce stricter payment terms or raise prices on your products in order to ensure access to cash. Even if your business qualifies for bank financing, the application process is slow and cumbersome. This is true even if you already have financing, such as a line of credit you want to raise the limit on.

What is Wholesale Invoice Factoring?

Wholesale invoice factoring is a financing method that allows businesses operating in the wholesale distribution industry to convert their unpaid invoices into immediate cash. It is a form of accounts receivable financing or distributor invoice finance where a company sells its invoices to a factoring company at a discounted rate in exchange for immediate payment.

If you’re a growing business, oftentimes you need working capital quickly to fund big projects. And unless you have excellent credit history with more than a couple of years in business, it will be difficult to qualify for traditional financing options through a bank. Wholesale invoice factoring can be a practical option in this case.

Wholesale lending in the form of wholesale invoice factoring is designed to address the unique capital expenditures and cash flow cycles of wholesalers. In addition to meeting both short-term and long-term funding needs, account receivable financing for wholesalers can bridge any gaps in revenue until your customers’ unpaid invoices are settled.

How Does Wholesale Invoice Factoring Work

The process of wholesale company invoice factoring is slightly different for each wholesale factoring company, but here’s how wholesale invoice factoring typically works:

  1. Invoice Generation: You deliver goods to your customers and generate invoices for the amounts owed.

  2. Invoice Submission: You then submit the unpaid invoices to a distributor factoring company, also known as a factor.

  3. Verification and Approval: The factor verifies the invoices and assesses the creditworthiness of your customers. This step helps determine the level of risk associated with purchasing the invoices.

  4. Funding: Upon approval, the factor advances a percentage of the invoice value to your business in days. (FundThrough has 100% advance rates, less a fee. AR factoring wholesalers fees typically include what’s known as a discount rate or factoring fee, which is a percentage of the total invoice value.). This payment in advance of the original net terms provides you with a quick cash injection, allowing you to meet your financial obligations or invest in your business during a growth phase.

  5. Collection and Payment: The distribution factoring company takes responsibility for collecting the invoice payment from your customers. (See how we work with your customers if this concerns you.) Once your customer pays the full invoice balance, there’s no more obligation.

Wholesale Factoring Use Cases

Any situation where you find yourself in need of working capital quickly and easily could be a use case for factoring for distribution companies, but these are the ones we see most often based on our experience with our clients:

  • Want to pursue a timely growth opportunity

  • Reduce time tracking down slow-paying customers and waiting 30, 60, or 90 days to be paid

  • If you have slow times, downtimes, or your business is cyclical.

  • You experience times of cash flow crunch.

  • You need access to working capital to grow as a wholesale company.

  • You can’t qualify for a loan.

The Benefits: Why Invoice Factoring for Wholesalers?

Factoring for distributors offers several benefits.

  • Quick access to funding. Wholesale invoice factoring provides an alternative to waiting for customers to pay their invoices, allowing businesses to access immediate cash for operational needs.

  • Flexibility in improving cash flow. Distribution factoring allows you to factor specific invoices only when you need a boost of funding. This can offer greater flexibility when it comes to improving your cash flow than traditional financing options like bank loans or lines of credit.

  • Easy process. The best wholesale invoice factoring companies use technology and other innovations to make the funding process quick and easy.

  • Better terms with suppliers. When you have sufficient, reliable working capital, you’re in a stronger position to negotiate better terms with suppliers as you can meet your financial obligations without delay.

  • No debt. Factoring is not a loan; it turns invoice into cash without adding any debt to your balance sheet. It also lessens the risk of non-payment or payment delays.

  • Less administrative burden. When you factor an invoice, the invoice factoring company takes care of the collection process on your behalf. This means you have more time to focus on your core business efforts rather than chasing down outstanding invoices.

  • No bank hassles. Traditional bank financing often requires time consuming applications and lengthy approval processes. That’s if you even have the credit history required in order to qualify. Not so with distribution factoring.

When it comes to choosing a wholesale factoring partner, it’s important to do your homework. We’ve made it easy for you to know the right questions to ask as you vet a partner to find out if they’re a fit.

By considering the answers to the questions below, you’ll be in a good position to make an informed decision and choose a partner that best suits your business requirements, so you can optimize cash flow and drive growth.

Does the factoring company work with wholesale providers?

Most factoring companies work with most industries, but not all. Some factors specialize in only a few industries. When you work with a factoring company that has experience in the wholesale industry, they already understand the nuances of the industry which makes it easier to work together.

FundThrough works with wholesale providers.

What advance rates does the factoring company offer?

The advance rate is the percentage of the invoice value the factor will advance your business. Advance rates can range from 60% to 100%, depending on the factoring company and sometimes the industry. Always inquire about the advance rates a distribution factoring company offers, as higher advance rates provide more immediate working capital for your business.

FundThrough advances 100% of the invoice amount, less a fee.

What factoring fees does the factoring company charge?

Any factoring company should be able to tell you what you’ll pay up front. This should include the discount rate – the percentage of the invoice the factor keeps for their fee, often between 1% and 5% – and any hidden fees. Sometimes a low discount rate can mean you’ll get charged hidden fees later.
FundThrough pricing – 100% advance rates minus our discount rate. No hidden fees.

Does the factoring company have minimums?

A minimum is the amount you must factor every period (month, quarter, or year) or a requirement that you must factor every invoice for a particular customer. Some factoring companies offer plans that require minimums, while others do not.

FundThrough doesn’t require minimums. Only fund when you need to.

Is AR Factoring for Wholesalers Right for Your Business?

Invoice factoring companies typically have a few qualifications you’ll need to meet before they can start funding your invoices. In most cases, your business will need to meet the following conditions before applying:

  • Nature of the business: you must be a registered business selling goods or services to other businesses (a.k.a., B2B)

  • Service completion: invoice factoring is only available for goods or services that your clients have marked as complete or delivered.

  • Encumbrance-free invoice: since invoices are the only collateral in a factoring arrangement, encumbrances such as tax liens can make it difficult to qualify for factoring. (But not impossible. FundThrough works with businesses on IRS and CRA tax payment plans all the time. We can even help you with getting an arrangement set up).

See if you’re qualified for FundThrough in minutes.

FAQs: Accounts Receivable Financing for Wholesalers

What is wholesale invoice finance? How is it different from factoring?

Wholesale invoice finance is often used as another term for wholesale invoice factoring, but it’s actually slightly different. With wholesale invoice financing, a financing company advances payment for your invoice ahead of net terms. You then repay the finance company for the loan, plus any fees over a set period of time. There is no customer contact, and you work with them to settle payment according to the original invoice terms.

With wholesale invoice factoring, a factoring company advances payment for your invoice ahead of net terms, minus any fees. The factoring company works with your customer to redirect payment, and manages the collections process on your behalf. Once the invoice is paid according to the original invoice terms, there’s no further obligation.

What Are the Four Types of Business Loans?

Along with revenue-based and equipment financing loans, there are four other common types of loan options for small businesses.

1. Business Term Loans

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.

2. Business Line of Credit

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.

3. Working Capital Loans

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.

4. SBA or Canada Small Business Financing Program loans

For wholesale businesses that may not qualify for a term loan, an SBA loan or a loan through the Canada Small Business Financing Program might be a good option as a portion of the loan amount is guaranteed by the organization or program rather than a bank or other financial institution.

How Does Wholesaler Factoring Compare With Other Kinds of Business 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.


  • Many business loans have relatively low interest rates when compared to many other types of funding.

  • Interest can be deductible on your taxes.

  • Depending on your requirements, you may have access to large sums of money to be used to grow your business.

  • On-time repayments can help improve your credit rating.



  • Many small, growing businesses don’t qualify for loans. They often need cash faster than the process would allow anyway.

  • Most lenders have strict guidelines for loans and a lengthy review process.

  • You may need to have a good credit rating. Anything else and you may not qualify and if you do you’ll likely pay a higher interest rate.

  • Rates can fluctuate depending on the market. The more you borrow, the higher interest you may have to pay as the lender takes on more risk.

  • A business loan and the debt will show up on your balance sheet, which affect the valuation of your business.


Lines of Credit

A line of credit (LOC) is a lot like a credit card. You can 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.


  • You can borrow when you need it.

  • When you’re short of cash, you can borrow only what you need as long as you don’t exceed your limit.

  • Making on-time payments can help improve your credit score.

  • Lines of credit can have low interest rates.

  • The payments on the line of credit vary and vary depending on your outstanding balance.



  • As with loans, oftentimes banks won’t give small, growing businesses a line of credit. They often need cash faster than the process would allow anyway.

  • There will be limits on the maximum amount you can borrow, which might not always be enough.

  • Although you pay-as-you-go, if you miss payments, are late, or move outside the terms of your agreement, you might face high fees.

  • It’s easy to misuse a line of credit (just like it’s easy to misuse a credit card).

  • If your business fails, you are responsible for any payments and debt incurred from using your line of credit.

  • You need to have been in business at least two years, and will need to provide bank account information, financial statements, tax returns, and more to qualify.

  • A line of credit is like a loan that needs to be repaid with interest.


Business Credit Cards

Like many forms of funding, the flexibility of credit cards is easy to use, making them easy to use too much.


  • It’s easier to qualify for a business credit card than for a line of credit or business loan.

  • You have quick access to the cash you need when you need it.

  • Many business credit cards have reward programs or incentives, like cash back or airline miles.

  • A business credit card can help build credit, which is helpful if you ever need to apply for a bank loan.


  • You may need to provide a personal guarantee to qualify.

  • High interest, annual fees and late charges can add up, especially if funding a large expense.

  • Many business credit cards do not offer purchase protection.

  • Business credit cards come with security risks like fraudulent charges from unauthorized use and stolen credit card numbers.

  • You risk overspending.


Receivables Factoring (a.k.a., Distributor Factoring)

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.


  • You can get access to capital quickly, often in days.

  • Get funding any time on short notice, with no funding limits and no hidden fees (specific to FundThrough)

  • Does not require your business to have a long credit history, which is best for start-ups and fast-growing firms.

  • Factoring relies on the creditworthiness of your customers, not yours.

  • Invoice factoring is easier to get approved for than most other forms of funding.

  • If your wholesale business is seasonal, factoring can infuse cash into your business to get you through the downtimes.

  • No debt because your accounts receivables are used as collateral.

  • You give up no equity or control in your business.

  • No long-term commitment after the invoice is paid



  • Invoices need to be verified (customer contact required). In the past, the negative perception of factoring stemmed from aggressive collection practices employed by certain factoring companies. However, at FundThrough, we take a different approach. We work closely with you before contacting your customers, ensuring a respectful and professional experience, and treating them as if they were our own.

  • Can be complicated to account for in bookkeeping. Accounting for factored receivables can appear challenging, but our step-by-step guide demystifies the process of recording a wholesale factoring transaction.

Our Approach to Working with Different Industries

FundThrough pays invoices in days for industries outside of this list as well.

Simple. Intuitive. Wholesale Invoice Factoring.

Built For Your Business.

Explore fast payments with an experienced fintech

Interested in possibly embedding FundThrough in your platform? Let’s connect!