Finance for Wholesale companies


The challenge of having stock when you need it !

If you’re the business owner or director of a wholesale business there are many challenges.

It’s often a challenge to make sure that what you’re wholesaling is in stock and available to your customers when they need it.


Many wholesale business start off as home business working from the garage or spare room. The business owners know there idea is good, the product will sell, so they source that product overseas or locally and then have to supply customers local, state or national basis. Buying stock overseas also means paying upfront on order and then full payment  on shipping which eats into the business cash flow.


If you’re the wholesaler who does the hard work and jags a really large customer (like a large grocery retailer, department store or national distributor) this presents a truly great problem to have in your business, why you ask, we it simple “Lots of demand for your product”. The problem is how do you fill the customer demand.


Some of the other  issues your face if you have a large growth in demand for your product is

  • distribution,
  • Supply logistics,
  • IT and processes
  • reliable supply,
  • good staffing,
  • sales channels and
  • of course how to finance the sales growth when it comes.

For many business owners the first point to obtain finance is their own personal resources which could include

  • mortgaged property
  • using personal cash assets
  • Borrowing from family/friends.

These sources work for a while but could be limited, change relationships and these loans do need to be paid back. The biggest risk for the business owner is how will the money be paid back when you are growing or worse, if there are issues in the business and you cannot pay the money back.


So for the growing wholesale business that needs more money, where do they go ?

Generally they go to their bank. The bank will say “yes” or “no” based on property security requirements and all their financial and credit position, but the funding will be limited to the

  • property security available
  • credit appetite
  • age of business
  • business financial strength,
  • borrrowing capacity,
  • spare cashflow to repay.


At a point in time if the business keeps expanding, more working capital is required and funding from the traditional sources of banking will become limited due to the above criteria.

Often as a wholesale business expands the stock requirements grow, the debtors grow and the level of finance required to fund the stock endeavours multiplies quickly. The business will need more working capital in order to pay its creditors.

The major assets of a wholesale business are generally the debtors the stock and in some cases there are limited fixed assets but these are usually financed.


So where does the business go to obtain cash and more importantly the cash flow to operate their business on a daily, weekly and monthly basis.


For a wholesale business is simple. Factoring, yes that’s it the business needs to factor it’s debtors. You know what I mean.


The factoring process will provide the working capital needed against the outstanding invoices of the business. The factoring process often known as Invoice Finance Group and Finance is a line of credit against the debtors at 80% with the other 20% of the invoice being returned when the customer pays their invoice less the small charge.


So if you’re a wholesale business that has invested money or loan money to your company how do you repay there loans and how do fund growth.


The real benefit of Invoice Finance over loans and overdrafts:

  1. You get money 24 hours after you deliver the goods to the customer, every week- 80% of the invoice value
  2. You get more money when the customer pays their invoice - 20% of the invoice value
  3. If you use the facility as a line of credit they will always be new money available to your business

When you sell to other business customers you often have to give at least 30 day terms. So there is a need to finance this period until you are paid. Debtor Finance brings forward the payments from your existing customers. This is why it works


It’s really a simple process and the cost generally becomes negligible, The equivalent of a small settlement discount. Now your wholesale business has sufficient cash flow to

  1. grow your business
  2. you’re able to also pay your suppliers, wages, creditors and taxes on time.


Business owners and directors often believe it is far better to self fund their business because the cost is cheaper. The issue is not cost its about  having access to money when you need it. The cost will also be competitive prices because that how it works. Your role on securing invoice finance is getting access to funds on the best terms. If your wholesale business grows it will be more efficiently and effectively funded from the assets on the balance sheet. For example that’s why you financed the delivery van instead of using your cash. Your debtors need finance as well.


If you would like to talk to a Cashflow Finance specialist about some answers and funding  your debtors with Invoice Finance contact us on 1800 FUNDIT that’s 1800 386 348.

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