Wholesalers, distributors and resellers often find themselves in a cash flow crunch due to the very nature of their businesses. That’s because wholesalers, distributors and resellers often:
- require large amounts of cash upfront to purchase product for resale
- have large, lucrative contracts where customers demand payment terms of 30 days or more
- don’t have many tangible assets that traditional lenders can use to secure financing
- deal in international trade (which makes many traditional lenders nervous)
If you are a wholesaler, distributor or reseller, here are three types of alternative financing that you can use to keep cash flow healthy:
1. PURCHASE ORDER FINANCING
Purchase order financing allows you to use a valid purchase order from a creditworthy customer to obtain financing to pay your suppliers. Purchase order financing is offered and financed by factoring companies. Typically, only businesses that purchase completed product from suppliers to resell at a markup qualify for purchase order financing. This form of alternative financing provides you with funds to deliver your goods on confirmed, non-cancelable purchase orders with little or no upfront costs.
2. FACTORING YOUR ACCOUNTS RECEIVABLE INVOICES
Factoring is selling your accounts receivable invoices to a factoring company at a discount in exchange for immediate cash. Instead of waiting 30, 60 or even 90 days for your customer to pay your invoice, you receive up to 90% of the invoice amount upfront, usually within 24 hours. The factoring company invoices your customer, receives payment and then reimburses you the balance, minus their factoring fee.
Qualifying for factoring is different from qualifying for traditional financing. That’s because it’s based on the creditworthiness of your customers, not yours.
3. A FACTORING LINE OF CREDIT
A Factoring Line of Credit is an alternative financing product unique to Accutrac Capital Solutions. It’s similar to traditional factoring, in that it’s based on you doing business with creditworthy customers. With a Factoring Line of Credit, however, Accutrac manages all of your accounts receivable invoices for you. A line of credit is established that’s equal to up to 90% of your outstanding invoices. You draw upon your Factoring Line of Credit as needed. And, you only pay factoring fees on funds drawn.
Any one of these three products can provide your wholesaler, reseller or distributor business with the cash flow it needs to grow and thrive. You may even want to discuss combining purchase order financing with factoring with a factoring company to optimize your cash flow.
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