About Wholesaler Financing
Wholesalers are an important moving part of the retail industry. Bulk orders keep our economy thriving, and we all know how important it is to keep up with demand in a time when instant gratification is encouraged. There will always be customers looking for more products to buy. Sometimes, however, wholesaler financing is needed to keep their businesses running strong.
As vital as wholesalers are, their needs are similar to that of every other business. They need working capital to keep orders moving and their cash flow in the green. In order to grow and maintain those bulk orders, funding is often needed. The amount and type of financing is at each brand’s discretion, as every business is unique in their budget and future goals.
Wholesaler Financing Opportunities
As many eCommerce business owners have learned, you need money to succeed in the competitive ecosystem. Material and labor costs are high, and they need to be paid before your customers pay for their purchases. Lack of cash flow can mean a pause in your operations and a possible loss of sales. You have orders that need to be fulfilled and goals that must be met. Financing is the way to keep your operations moving. With that said, here are a few of the best options available to wholesalers.
Purchase-order financing
Purchase-order financing, or PO financing, is where a PO company provides the wholesaler with enough funds to cover the whole or part of the purchase order. The purchase order is the contract between you and the retailer, stating that you agreed on delivering a certain amount of goods that are set at an agreed-upon price.
Once the wholesaler is ready to ship to the retailer, the retailer will pay the purchase order in full. In some cases, the PO company will charge the retailer instead of the wholesaler, collecting payments and fees, and then providing the wholesaler with their payment. This is a great option for those wholesalers who have a lot of large orders to meet and want to keep their cash flow flowing steadily.
This is usually done on an order-by-order basis, and can be much easier to handle than a lump sum loan from a bank. Regular loan repayments can take up a huge part of your budget, and interest can eat into necessary funds. Depending on the PO company you work with, the fees may be cheaper than paying for a bank or lender’s interest.
Bank loan
A bank loan is money loaned to you from a traditional bank. Their requirements are usually harsher than alternative lenders, and they typically have a long application process. If you manage to get approved, they will provide you with a lump sum of money and a specific length of time to repay the loan. This involves fixed monthly payments, regardless of the amount of customers and purchase orders you have. This is a well-known option, but not always the easiest when it comes to getting funding.
Banks offer many types of loans to businesses. Keep in mind, however, a majority of traditional banks don’t loan to start-ups and require that your business be at least one year old. Each bank has unique guidelines regarding eligibility, but the average yearly minimum revenue for businesses in the USA is $50,000.
With funding to expand your brand, you can finally grow your company. Just know that the bank will need you to disclose your plans for the loan, and they usually require a credit check. They will monitor it and dictate the limits you have every month. If they approve your plan for the funds, then this shouldn’t be a concern for you.
Line of credit
Lines of credit are great short or long-term solutions, especially for eCommerce businesses that want revolving credits. As you make monthly payments, more money becomes available to you. It’s beneficial for day-to-day expenses as well as those bulk orders. The offered interest rate depends on your credit history, so this can be a pro or con on your list. As long as you make regular payments, you’ll have steady cash flow in the palm of your hand.
Interest is only charged on the portion of the loan you’re utilizing. Lines of credit typically have lower interest rates than other options, and access to capital is conveniently at your fingertips. What’s the catch? The low loan cap. Often, these loans are on the small side, but if it fits your budget, then this may be the right type of funding for you. If you’re looking to expand and need a large lump sum, then something like a bank loan would be better for your brand.
You’ll find this option at banks, but there are many lenders who offer lines of credit with different eligibility requirements and guidelines. It’s a flexible and manageable solution, as you don’t have to worry about a large fixed monthly payment.
Revenue-based financing
Revenue-based financing is a type of funding that businesses repay based on their revenue. Wholesalers receive a lump sum of capital and proceed to repay it as a percentage of future sales. Usually, investors collect monthly payments until the amount owed is paid in full. The amount of time it takes to pay off the investor can vary because of this.
Compared to other types of funding, this choice is one of the quickest when it comes to the application. There are no credit checks or collateral involved. On the other hand, revenue-based financing is also more costly compared to the interest you would have paid on a bank loan or line of credit. They take a percentage of money invested that usually exceeds that of traditional lenders.
WIth revenue-based financing, the investor does not take equity in the business. They merely supply the funds and trust the brand to increase their returns. Therefore, in order to qualify, a business must bring in regular revenue.
Asset-based lending
Asset-based lending is the process of a lender reviewing the value of your inventory and business in order to provide you with a realistic loan amount. Your assets will be used as collateral in the circumstance that you don’t pay the loan back or miss too many payments.
Approval for loans such as this depend on the business’s credit score and the value of assets. The assets can include your equipment, inventory, property, and even unpaid invoices. This type of lending is great if you’re in a pinch and need the cash to meet demand, however, you’re risking your business by offering it up as collateral. If, at any point, you’re unable to make the payments, they can repossess your assets.
Knowing the risks of a lump sum, you can also apply for an asset-based revolving credit. Each week or month, the lender calculates the value of your accounts receivable, or outstanding invoices, and your inventory to use as the borrowing base.
Equity financing
Equity financing is the process of selling shares of your brand in exchange for capital. Ultimately, you’re selling pieces of your company. Investors that buy these shares from you can be family, friends, angel investors, and venture capitalists.
This type of financing is often a good choice for startups that need a boost. Angel investors, or individuals and groups that choose to invest in businesses they believe in, and venture capitalists, or investors who utilize funds from a firm for this purpose, are the most common types of equity investors.
If a business chooses to accept equity financing, they commit to giving up a share of future profits and often decision-making power in their company. In exchange, they receive expertise and guidance from the experts who invest in the business.
Merchant cash advance
Merchant cash advances are just how they sound—they’re cash advances. The brand receives a lump sum of money to go towards their business operations, and you repay the funding with your future sales. A percentage is taken out of each sale during credit and debit card transactions. It’s easy to get approved since they have lenient requirements compared to banks. If you have regular credit card sales and have been in business for at least three months, you are eligible with most lenders.
You can use the advance for anything related to your business operations. The lender doesn’t dictate your investments or supply orders. As long as you sell your goods and they get their piece of the sale, you’re doing everything right. Merchant cash advance agreements vary, so make sure to read the contract thoroughly so you understand the cost of capital and conditions.
It’s usually a quick and simple application process. For some, there’s no need for a credit check. They’ll determine your eligibility by the amount of revenue you generate.
Invoice factoring
Invoice factoring is a type of alternative funding that involves a small business selling their outstanding invoices to a factoring company in exchange for cash. These are sold at a discount, so your company will only receive part of the invoice up front. The discount percentage fluctuates, depending on the type of contract you work out and the factoring company. It allows wholesalers to optimize that hard-earned cash before the customer fulfills their outstanding balance.
It’s a great choice for those who have large outstanding balances and long payment terms. If this sounds like your type of business model and industry, then it’s definitely worth speaking with a factoring company. They’ll take a look at your invoices’ worth, your company’s worth, and your business history to determine your eligibility.
Once they approve you, they’ll purchase your invoices and quickly give you up to 90% of the invoices’ worth. More cash up front means that you’ll be able to keep up on expenses, such as rent, utilities, payroll, and inventory. However, you’ll also owe them a fee for the service, and if your customers fail to pay the invoices, you can run into trouble.
8fig: An Alternative to Wholesaler Financing
8fig is another great option for those in need of wholesaler financing. It’s a beneficial funding and growth platform that provides business owners the chance to plan, oversee, and finance their business without the challenges that come with strict eligibility requirements. With fast, flexible funding, you have a better chance of growing your eCommerce brand.
Why use 8fig for wholesaler financing
Other financing options provide you with one lump sum that is tough to pay off. With 8fig, we provide regular cash flow for your business, right when you need it. This funding is aligned to your supply chain costs to ensure that you’re optimizing your capital and growth. We’re also flexible, which means that you can change the details of your plan, such as the funding amount and your payment schedule.
How 8fig works
1. Apply
The application process is fast and easy. Answer some questions about your business and sales, and then provide basic information about your supply chain stages and expenses.
2. Connect your store and bank account
In order to provide you with an optimized Growth Plan, 8fig requires that you connect your store and bank account to the 8fig platform.
3. Get funded
With 8fig, you can get funded in just days. Since 8fig funding is continuous, you receive capital infusions into your business right when you need it.
4. Make adjustments
If something changes and you need to adjust your payments, remittance schedules, or even funding amount, you can always do so thanks to 8fig’s flexibility.
5. Grow your business
All that’s left to do is sell, sell, sell. With 8fig, businesses are able to scale 2.5x as fast.
What 8fig offers in addition to financing
There is more to 8fig than our excellent funding plan. 8fig supplies you with tools that your brand needs to optimize cash flow, analyze your sales, and improve your brand.
8fig wants you to reach your goals because when you win, we win. Supply chain mapping, sales analytics, and planning software are just a few of the things we can offer you during your race to the top.
Who is eligible for 8fig wholesale financing
You may have run into strict eligibility requirements if you applied for funding from a traditional lender such as a bank. 8fig is much more flexible and offers unlimited capital, giving you the chance to grow earlier and faster than other financing options allow.
The application process is easy, and you can get your much-needed funds within days, not weeks or months. You’re still the deciding factor for your brand; all we do is supply you with the funding and cash flow help you need. With 12 months of trading history and at least $100,000 in sales per year (with an average of $8,000 in sales per month for the last three months), you’re likely eligible for wholesaler financing from 8fig. 8fig.
How to apply for 8fig financing
It’s easy to apply for 8fig financing, and it only takes a few minutes. Simply answer the questions and follow the prompts and you’ll get funded in no time!