Wholesale Inventory Financing

Wholesalers often need to look to loan companies for extra finance in order to stay fluid and expand their businesses. Often, goods need to be paid for, not to mention wages and running costs covered, before customers settle their invoices. Without financial help, many wholesalers just can’t function.

In this guide, we will examine the options for finance that are available to you as a wholesaler that may help your business grow and prosper. 

What is wholesale financing?

The financing for the wholesale sector can take many forms. Inventory financing is probably the most common; after all, you need your warehouses full of stock to sell. But there are many other areas to consider: trade finance, working capital, cash for new equipment and more. Wholesalers may need finance for all sorts of reasons. Some of them can be planned for, others are unexpected.

Why consider wholesale financing?

Let’s look at some of the reasons why a wholesaler might need financing:

Responding to the marketplace 

How we shop, and what we shop for has never been more dynamic. Trends come and go faster than ever before, and wholesalers need to respond. This often means having to invest unexpectedly in new product lines. Finding the cash within the business may be difficult or impossible. Extra finance can mean your wholesale business can take advantage of sudden opportunities that this fast-changing market throws up.

Installing new tech solutions and the latest equipment

Technology is constantly evolving, and new systems are being developed all the time that allow businesses to run more efficiently, both in the front office and the warehouse. It is important to remain competitive, and that means investing in the best possible systems and equipment. This helps both you and your customers.

Payroll and workforce costs

All businesses can suffer cash flow problems, however well run. You cannot afford to lose the valuable workforce you have assembled; they are the bedrock of your business. Wholesale finance can be a way of smoothing out the ebb and flow of your working capital, allowing you to be better able to fulfill the payroll every time.

Expansion

They say that if a business stands still, it is shrinking. All wholesalers need more space; it is the only way you can stock more inventory. But finding the capital to invest in more real estate, building larger warehouses and fitting out with stacking can be difficult. It is then that a wholesale business needs to look to finance providers for the money they need to invest.

Customer service

Getting and keeping good customers is vital to business success. Anything that can be done to make their lives easier, and their buying experience better has to be done and paid for. You cannot skimp on this area. You need to form trusting partnerships with your customers so that they will support you if conditions change. 

What are my options for wholesale financing?

There are many options available for the wholesale business owner depending upon what the money is required for.

• Asset-based wholesale loans are going to be the most popular because they use your inventory as collateral, which often makes them easier to get from a credit score perspective. They do still come with stringent requirements, though, so do your research.
• Bank loans are often the cost-effective option for borrowing, with low interest rates and generous terms. They are perfect for real estate purchases, equipment buying and many other business needs. The downside is that you need an immaculate trading history and excellent credit scores in order to qualify.
• SBA loans are the creme de la creme of bank loans. Because they are largely underwritten by the government, they tend to offer the borrower the lowest interest rates and longest terms. They are perfect for large capital expenditures, like building a new warehouse or purchasing major equipment items. But the competition for these loans is high, and the criteria you need to be offered one very strict indeed.
• Alternative wholesale distribution loans have less exacting requirements and are usually much faster to arrange and are perfect for those businesses that maybe don’t qualify for a loan from a more traditional lender. The penalty is that they usually carry higher interest rates and shorter terms.
• A wholesale cash advance is a way of securing finance by selling your future receivables in return for cash up front then repaying the amount directly from the bank account on a daily or weekly basis.
• A line of credit may be a good fit for inventory finance, sudden expenses and easing cash flow. You agree a maximum amount with the lender and then withdraw as much or little of this as you need, only paying interest on the actual amount you borrow, making repayments regularly. Often this is on a rolling basis whereby the money you pay off is available once again to borrow. The easiest way to think of it is as a credit card. Though extremely flexible and popular because of that, it can be quite an expensive way of borrowing.

What are the requirements to apply for wholesale financing?

The requirements needed for wholesale financing rather depend on the type of loan you are seeking. It is fair to say that having an excellent trading history over a number of years, good credit scores and a spotless record with previous loans will not hurt with any application. In fact, for many loans, especially high-value ones, these qualifications are mandatory. Few lenders will consider startups or businesses in their first 1-2 years of business.

That is not to say that you always need a spotless record in order to get finance. On the contrary, there are many alternative lenders who have much less stringent demands on their borrowers than more traditional finance companies, especially if it’s secured against your inventory.

Is there wholesale financing for small businesses?

There is certainly wholesale financing available for small businesses. While some loan companies have high minimum amounts they will lend, there are many lenders with no such restraints. For example, some companies offering lines of credit for inventory purchase will only lend in excess of $500,000 or even more, but you will find many others that will be happy to advance far less than that.

How to apply for wholesale financing?

For traditional loans, you may have to jump through hoops in terms of paperwork required, inspection of your warehouse and systems and studying of your fiscal probity. This can all take time and may not be ideal if, for instance, you want to leap on a business opportunity. However, it may be worth it if you need funds to expand your whole operation.

On the whole, internet-based finance companies have quicker application processes and faster decision times too and offer a better solution if you need cash fast.

If you’re going for asset-secured wholesale financing, then your lender may want to tour your location(s) to see how their investment will be secured.

You should, however, get all the information you are likely to need at your fingertips before beginning any application procedure. If you’re looking for business financing, be sure to compare loans with us before you apply to any. We’ll compare the best loans and show you the ones that will be most affordable for you.

How do I choose the best wholesale financing company for myself?

The only way to choose a wholesale financing company yourself is extreme due diligence. You have to put in the time and resources to, firstly, find out the sort of financial package you need and, secondly, choose a provider. There are no shortcuts. If you make a mistake, you’re going to pay for it – literally.

Taking out a loan is always a serious affair and could affect your business for years to come, so you need to choose wisely. Always examine the figures carefully and find out exactly what the loan is going to cost. Also, don’t be too generous in estimating your business’s future performance when working out what you can afford. The commercial world is quickly evolving, and you don’t want to be caught out.

There are many options for finance available to a wholesale business, and which one to go for very much depends on how much money you want and what you need the money for. Looking for a large long-term loan for expansion is one thing, seeking immediate cash to buy unexpectedly available inventory quite another.

It can seem a daunting process trying to find what finance is best for you. The type of loan you need, choosing a provider, assembling the paperwork is certainly a chore. You can do it yourself, or task one of your employees, but it will involve time and effort that may be better spent running your business

PrimeRates can make the process easy and fast and take the burden off your shoulders. Fill in a pre-qualification application that doesn’t impact your credit score and, if you qualify, we will send you offers from our lenders that best suit your needs. Finding funding couldn’t be more straightforward.

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