As a successful wholesale distribution company, you may be prepared for seasonal sales, but can your cash flow keep up?
Seasonal sales are the boon for many wholesale distribution companies, and careful planning is obviously a fundamental requirement for those in this industry. Many have planned well ahead for the expected large volume orders using loans or lines of credit from the bank to boost cash flow, but what about that huge unexpected order? What happens then?
You have to be concerned with many aspects of seasonal business, optimizing supply chains and distribution networks to guarantee delivery of high volumes of product to retailers. Preparation for the buying frenzy that is synonymous with the holiday season is a key part of your business. In order to be successful it is vital that your working capital is a well-oiled money machine, and will not let you down at the last hurdle – payment to your suppliers! Don’t lose the business to a competitor because they are more able to make payments, when you are a better fit for the contract.
No amount of diligent preparation can ensure your working capital will be enough to pay the manufacturers for the potentially sudden and extremely large seasonal order. There are always situations where your retail customers simply do not pay on time (retailers are well known for demanding long payment cycles of anywhere from 30 – 90 days, and almost never pay cash on delivery) and you find yourself in a cash flow crunch. No business wants to turn down a large volume order due to a lack of cash reserves.
If you have not prepared in advance with a loan or line of credit, or your company simply cannot qualify for extremely legitimate reasons, such as lack of credit history, less than stellar credit, or you are new to the market, what are you going to do?
You need the money now; you do not want to be concerned with a large loan that needs to be paid back! This is a short-term problem but it is urgent and needs to be addressed as quickly as possible so you do not lose that order.
Commercial financing, in the form of invoice factoring could provide the best answer in this scenario. You have funds in the pipeline in the form of outstanding invoices, so why not use them to your advantage?
Receive an advance on your accounts receivable up to 90% of the value of the invoice, with the remainder submitted to you once the invoice is paid, minus a small factoring fee. Not only this, the factor becomes your AR department for these transactions, taking the worry out of payment collection. The application process is quick and easy, the approval rate is high. Once you are set up it is simple to use again and again.
This form of commercial funding is not only useful in a cash flow crunch; it can be a regular form of financing for your company.