What Every Wholesale Distribution Company Should Know About Factoring
In the wholesale distribution industry, everything depends on consumer demand. Distribution companies want to run successfully with the least amount of inventory possible, but they also must anticipate what the owners and managers of the retail companies they sell to and their customers are going to want. Stocking up on items that customers want takes a lot of investment – which many wholesale distribution companies just don’t have right now. There is a way to ensure you have the capital needed to stock up on extra inventory, however. The solution is factoring. Read on to learn what every wholesale distribution company needs to know about factoring.
Also known as accounts receivable factoring, factoring services help wholesale distribution companies with the capital needed to purchase inventory, as well as help to pay for operating costs such as storage space rental fees, telephone bills, operating equipment, delivery equipment and more. Factoring works by offering distribution companies cash in return for their invoices and/or accounts receivable. The wholesale distribution company just submits as many of their invoices as they want to the invoice factoring company and they receive a percentage of the total amount of your client invoices, minus a small fee, in cash. The invoice factoring company then 101-01collects on the invoice, in most cases taking on 100% of the credit risk.
Factoring companies work quickly – many can provide funding in as little as 24 hours. Factoring is not a loan, once your clients pay their invoices, the factoring company is repaid. Factoring your invoices not only provides quick cash to buy seasonal inventory or compensate for inventory that didn’t sell well, but it also leaves you free to focus your time and company resources on more profitable things then accounts receivable activities.
No matter what type of products your wholesale distribution company works with, factoring services can help. Most invoice factoring companies will work with any wholesale trade company that sells products to merchants, retailers, contractors and/or industrial, institutional and commercial users. Wholesale distribution firms that sell both non-durable goods (such as groceries, chemicals, printing and writing paper, and periodicals) and durable goods (industrial supplies, clothing, furniture, office equipment, and other goods that can be used repeatedly) are eligible for factoring.
Big or small, startup or veteran, whatever type of distribution company you have, at some point you have or will experience cash flow problems that can impact your ability to purchase stock or inventory. Large distributors that sell everything but the kitchen sink (i.e. distributors with a large stock of various, unrelated closeout items), midsized distributors who offer a variety of products to 199-01customers in just one industry, and wholesale distributors that specialize in a unique niche items can all benefit from factoring. Start a working relationship with an invoice factoring company today, and ensure that you’re never blind-sided by cash flow problems again.
Processing your request, Please wait....
