Wholesaler Business Loans

Learn to deal with credit issues as a wholesaler

A wholesaler serves a critical role in the supply chain. They bring customers and products together. The manufacturer relies on the wholesaler or distributor to sell their products to the end customer, whether it is another business or an individual. The customer relies on them to bring products to the general public rather than relying on a single point of sale. 

Even though the wholesaler has an important role, they are also often placed in a challenging position. They must keep the cycle moving while still paying and receiving money for the product as it moves. Credit is the key to running a successful wholesale distribution company, but it can be challenging to manage.

Create Payment Terms That Work for Your Business

As a distributor, you must be focused on both accounts payable and accounts receivable. You pay the manufacturer for the goods you buy while receiving payment for those you sell to a retailer or end customer. Managing this system is a balancing act because most distributors don’t have a lot of cash sitting around. 

Before you create payment terms for your customers, you must know the terms from the manufacturer. You want to work it that you receive payment from your customers before invoices from the manufacturer are due. So, for instance, if the manufacturer requires you to pay within 45 days, you may need your customers to pay sooner than that. 

Even though the wholesaler has an important role, they are also often placed in a challenging position. They must keep the cycle moving while still paying and receiving money for the product as it moves. Credit is the key to running a successful wholesale distribution company, but it can be challenging to manage.

Make Payment Terms Clear

Before beginning a new relationship, you need to make all payment terms clear. Don’t assume that the other party knows your intentions. If it’s not included in the written contract, it doesn’t exist. 

Explain the terms to all new customers and answer any questions they might have. Also let them know the repercussions for non-paid invoices from the start and follow through. When you let accounts get old without being paid, you increase the risk that you will never see payment.

Know Your Customers

Before you extend credit to a customer, make sure you do a thorough credit reference check. This is important whether you’re extending credit to a business or an individual. You should also determine how lenient you will be with what type of credit to accept. 

For example, a new business with no credit history could be an excellent customer. You may not want to deny them credit, but you could limit the amount or change the terms with the agreement that you will re-evaluate in six months.

Negotiate Terms with Manufacturers

Your customers are only half of the equation. The other half is your ability to pay the manufacturer. It’s possible to negotiate terms with them that will work for you and provide some added breathing room until you have cash in hand. 

While some manufacturers have a hard policy on accounts, many will make extensions or exceptions. You may be able to pay half at the deadline with an understanding that the other half is due 30 days later. The time to negotiate is upfront rather than waiting until you are unable to pay the invoice.

Have a Backup Plan

Even with the best plans and processes in place, there will be times when things don’t work the way they should. You need a backup plan in place to cover expenses until you receive payment on your accounts receivable. 

A short-term business loan can be the answer to your situation. It provides you with cash to pay your invoices while waiting for payment from customers. Instead of paying other bills, you would use the cash to repay the loan. 

If you charge your customers a late fee or interest over a certain timeframe, you can even make up the difference in cost for getting a loan. A business loan shouldn’t be your answer on a regular basis, but it can get you through difficult times so your business can continue to succeed. 

Fast Track Lenders provides short-term business loans to businesses that are waiting for payment from customers. Simply fill out the online application to have money in your account in just a few days. Don’t let issues with accounts receivable hamper operations when a loan will keep you moving forward.

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