Business Loan Options for Wholesale & Distribution Companies

Business Loan Options for Wholesale & Distribution Companies
Ronis Gracie
on November 19, 2015
Read in 2 min

Wholesalers and distributors know the meaning of competitive business. When there is a dip in cash-flow, inventory, or some other kind of financial setback, companies in distribution and wholesale can lose customers quickly. It is important to keep supplies stocked to avoid losing key customers and eventually having to close the business.

If you need money to replenish inventory or perhaps pay for warehouse renovations, your wholesale distribution company may benefit from a business loan.

Business Loans for Wholesalers and Distributors

There are several financing options for distributors and wholesale companies. Your unique situation will help you decide which loan product is best for you. Think about how much you need, when you can make payments, and how you’ll be repaying your loan.

For example, a cash advance may be suitable in emergencies when your business needs quick access to money. On the other hand, a small business loan is the better option when financing a large purchase that you’d prefer to pay back slowly over time.

Some of the most popular types of loans used by wholesale or distribution companies include:

Working Capital Loans

Secured loans like working capital loans are great because the lender will allow you to pledge your income as collateral. The exact amount of collateral required is typically based on revenue.

Invoice Financing

Invoice factoring is another type of financing frequently used by distributors and wholesalers. Your lender will calculate your loan amount based on invoices that show how much your customers owe. It’s usually easy to get these loans within a matter of days, and interest rates are moderate. Credit does not have to be perfect for approval.

Small Business Loans

Small business loans allow distributors and wholesalers to finance money over a long period of time. Interest rates do not usually exceed 10 percent. With some loans, repayment terms may be as long as 20 years. Although they’re guaranteed by the federal government,you’ll still need to go through a private lender to obtain an SBA loan.

Merchant Cash Advances

Cash advances are best for financial emergencies when funds can be repaid quickly. Interest is usually factored in over the span of a month or two as a set fee. Income is the main criteria banks will look at when you apply for an MCA, so you can get approved even with bad credit.

Problems Getting a Loan for Your Wholesale Distribution Business?

The three biggest obstacles preventing your distribution/wholesale business from getting a loan are:

  • Not enough income: Traditional lending institutions want to see you earning at least $8,000 or more each month from your distribution/wholesale business operations.
  • Poor credit: Having good credit and fulfilling your insurance requirements for your wholesale/distribution company will make a big difference when applying for a short-term business loan.
  • Lack of business history: Without a business history of at least 6 months, your wholesale or distributor business will have trouble qualifying for a loan. You may have better luck looking at start up financing options.
Ronis Gracie Finance Journalist

A serial entrepreneur experienced with building several small companies from the ground up and consulting for many others, Ronis understands the finer points of small business financing. He’s passionate about small business & is committed to simplifying small business lending for others.

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