Last Updated on April 28, 2021 by Grey Idol
Some industries are simply more suited for invoice factoring than others. The wholesale and distribution industry has been factoring receivables for hundreds of years, so let’s find out why that’s the case.
It’s a natural fit for wholesalers and distributors, as they frequently struggle with cash flow. As the in-between for manufacturers and retailers or resellers, these business struggle with balancing income and expenses at any given point in time. Payment delays, payroll demands, seasonality and overhead expenses all contribute to a constant cash crunch that can difficult to pull out of without additional funding.
If your wholesale and distribution business is looking for a fast and easy way to boost working capital, factoring may be a great fit.
What is Factoring for Wholesale and Distribution?
Invoice factoring is a unique financing tool for wholesale and distribution companies, as laid out in the section above. But what does exactly does it mean to factor your invoices in the wholesale and distribution industry? Factoring is the process of selling your receivables to a factoring company (also known as a “factor”) in exchange for cash up front. The factor typically advances between 80-90% of the total invoice value. Once the invoice is paid by your wholesale and distribution customer, the factor will release the remainder to your business, minus a small factoring fee (typically 1-5%).
Why Factoring Works Well for the Wholesale and Distribution Industry
Wholesale and distribution companies often have extremely high receivables at any one point. Their unique position between manufacturers and retailers means that they feel pressure from both ends, limiting their leverage and increasing their dependence on the prompt payment of their customers.
On top of that, wholesalers and distributors deal with long payment terms, and frequent payroll and overhead expenses. This strains many wholesalers who must operate with limited cash flow at their disposal. Some struggle or fail to stay afloat without sufficient and affordable financing. Invoice factoring allows wholesale and distribution businesses to extract cash immediately from their receivables, dramatically shortening the payment cycle.
What makes oil and gas factoring different from traditional bank financing?
Unlike a traditional bank loan, invoice factoring for wholesale and distribution companies is not a loan at all. Its the sale of an asset (your outstanding invoices) in exchange for cash. That means it will not count against your credit rating. The minimum requirements are more accessible for this type of financing, allowing businesses with limited operating history, lower credit scores or few assets to borrow against.
What are the benefits of factoring with altLINE?
We’re top-ranked by Investopedia, TheBalanceSMB, Business.com, Fundera and Merchant Maverick. Why do they rank us so well?
Our services are competitive:
- Rates from 0.50%
- Advances up to 90%
- No Application Fee
- No Hidden Fees (Ever)
- Fast Approval
- Local Customer Service
Our track record is strong:
- In Business Since 1936
- Over $600 Million in Funded Invoices
- We’re a trusted community bank
Want to find out if factoring is a good fit for your wholesale and distribution company?
If your business is short on cash, but have lots of outstanding invoices, you might be a fit. To get a free quote, apply here or call (205) 607-0811 to speak with a sales representative today. We look forward to helping you grow.
Grey is the Director of Marketing for altLINE by The Southern Bank. With 10 years’ experience in digital marketing, content creation and small business operations, he helps businesses find the information they need to make informed decisions about invoice factoring and A/R financing.