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Wholesale Distribution Loans – Financing For Distributors

Wholesale Distributor Financing

A certified Merchant Wholesale Distributor is essentially the middleman between a manufacturer and a retailer. A wholesale supplier company handles the wholesale shipments for the manufacturer of a specific product; these products typically get shipped to the wholesale distributors warehouse. From there, the wholesale distributor deals with retailers who are looking to purchase products at a wholesale price. Retailers then mark up these wholesale prices and sell them to consumers or use these products themselves, such as a bakery buying ingredients from a wholesale distributor.

Information and Statistics on the Wholesale Distribution Industry

The United States wholesale distribution industry is booming today, with sales at approximately 3.2 trillion dollars. However, some specific segments of the wholesale distribution industry have seen some decline in sales; these segments include machinery, equipment, oil, metals, and minerals. This is largely in part due to the recovering economy, as well as consumer trends in good health and going green. On a positive note, since 1987, the wholesale distribution industry has had a consistent and steady gross domestic product, or GDP, of seven percent, ranging from segments such as grocery and food services to home furniture and furnishings. While the wholesale distribution industry did not see too much growth in the beginning of 2016, the latter half of the year is showing promising statistics for wholesale distribution companies.

In the United States today, there are over 300,000 wholesale distribution companies, making this an incredibly diverse and competitive industry to be in. The major upside to the wholesale distribution industry is that it is highly fragmented. This means that the wholesale distribution industry is comprised of many small, privately held companies – unless you run a wholesale distribution company in the pharmaceutical industry. Since 1975, mergers and acquisitions in the pharmaceutical wholesale distribution industry have reduced the number of United States companies from around 200 down to around 50. As a result, many wholesale distributors are starting to turn to specialty markets.

Trends for Wholesale Distribution Industry

With an increase in profitability in 2016, wholesale suppliers are facing some potential trends that are forcing companies to invest in newer technologies and catering to a more specialized and profitable niche of products. Since there are some wholesale distribution companies that have not fully recovered from some of the negative trends recently, paying attention to current trends is vital in allowing your wholesale distribution company to grow. Considering a variety of financing options can help, starting with traditional bank loans. If you need other forms of loans faster than a traditional bank loan can offer, looking into non-traditional financing options such as merchant cash advances could be beneficial. Here are some of the trends wholesale distributors need to be aware of in the upcoming years.

Why a Wholesale Distributor Would Need Financing

  • New equipment and technology systems for both the front and back end of your wholesale distribution business is the most essential trend wholesale suppliers need to be focusing on for the upcoming years. There have been so many different technological advances in the past few years that have allowed businesses across all industries run more smoothly, as well as making everything easier for your customers as well. These major technological trends that are impacting wholesale distribution companies include:
  • Online Shopping, Omnichannels, and ECommerce – We have touched on the importance of online shopping and omnichannels in (LINK4)previous blogs, and the importance of having these technological advances implemented into every business. (LINK5)Now, omnichannels are in high demand and expanding outside of just retail industries. Wholesale distribution customers are demanding access to omnichannel experiences, including the redesign of websites for more ease and accessibility, creating portals for online shopping that are efficient, and marketing through social media and other venues.
  • Specialized systems are essential in managing back of the house functions for wholesale distributors. These can help with inventory control, shipping and receiving, accounting, client management, bar coding, and so much more. These new technological advances have made wholesale distributors more efficient and able to identify issues that need to be fixed in the supply chain.
  • Payroll and workforce expenses are inevitable in every industry. Many wholesale supply companies took a hit in the past few years, leading to wholesale distribution companies needing access to more capital. Financing options are always available during difficult times and to keep a wholesale distribution company afloat.
  • Space and capacity. Having enough space for your wholesale products is a given in the wholesale distribution industry. Without ample space to store all of your products, you cannot make a profit. While this is an obvious and unavoidable expense, depending on where your business is located, this can be incredibly expensive. Looking into different financing options to help cover leasing costs of your warehouse for your wholesale distribution business could be incredibly helpful.
  • Customer service: top customers is essential in today’s wholesale distribution industry. High-valued customers should be given superior service to help lock in these customers in case industry statistics change. Some wholesale distributors do this by investing and upgrading in services to enhance the buying experience for their top customers.

Types of Wholesale Distribution Loans

Types Rates Terms Funding
Bank 6-10% 3-7 years 14-30 days
SBA 6-10% 3-7 years 10-30 days
Line of Credit 5-15% 1 – 3 years 7-30 days
Alternative 6-25% 1-5 years 5-7 days
 Cash Advance 1.16-1.55 3-24 months 1-3 days
Invoice Finance 1-2% weekly 1 – 90 days 1-3 days

Distributor Bank Loans

When wholesale distribution companies look for top-rate financing, the first choice is always a bank term loan and/or a line-of-credit. Bank-rate wholesale supply loans offer loans for working capital purposes, equipment purchases, real estate and nearly every business need. Distribution and wholesalers rates beginning in the mid single digits, with terms ranging up to a decade or more. But to qualify for bank-rate financing the distribution company needs to have excellent business credit as well as exhibit the ability to service the new debt.

  • Rates: 5-10%
  • Terms: 1-25 years

Documents needed for bank loans:

  • Wholesale-Distribution tax returns 
  • Wholesale-Distribution income statements 
  • Wholesale-Distribution balance sheets 
  • Schedule of liabilities 
  • Owner’s tax returns 
  • Owner’s personal financial statement

SBA Distributor Loans

SBA wholesale supplier loans are a form of bank-rate financing provided by traditional lenders. The difference between a SBA loan and a traditional bank business loan is the fact that the Small Business Administration agrees to cover a large percentage of the lender’s losses should the wholesaler and/or distribution fail to repay the loan.

  • Rates: 6-8%
  • Terms: 3-25 years

Documents needed for an SBA loan:

  • Wholesale-Distribution business tax returns 
  • Wholesale-Distribution income statements 
  • Wholesale-Distribution balance sheets 
  • Schedule of liabilities 
  • Owner’s tax returns 
  • Personal financial statement

Alternative Wholesale Distribution Loans

Alternative wholesale and distribution loans are always an option for business owners that don’t qualify for traditional financing. Alternative loans are easier to get than traditional loans, in the sense they require lower credit scores and less financial documentation.

  • Rates: 8-25%
  • Terms: 1-5 years

Documents needed for alternative lending:

  • Business tax returns (2 years)
  • Income statements (year-to-date)
  • Balance sheets (year-to-date)
  • Schedule of liabilities (list of all business debt)
  • Personal tax returns (1 year)

Asset Based Distribution Loans

Wholesale distribution asset based business loans are a way for a wholesaler to use their business property (or even personal property) as collateral to obtain working capital. Asset based lenders offer up to 50% of the property’s value, even if the wholesaler has a 1st or 2nd on the commercial real estate.

  • Rates: 10-20%
  • Terms: 1-5 years

Documents needed for wholesale distribution asset based lending:

  • Application
  • Bank statements 
  • List of collateral
  • Appraisal

Wholesale Distribution Cash Advance

Wholesale distribution cash advance financing is a way for a wholesaler to sell their future receivables in return for immediate cash. The wholesaler will sell their future bank account deposits, and repay the lender through either daily or weekly repayments taken directly from the wholesaler’s bank account via daily ach.

Documents needed for wholesale distribution cash advance:

  • Application
  • Bank statements and/or credit card statements

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