Financing for wholesale and distribution
Distributors buy inventory up front and get paid later. Working capital closes that gap.
Key points
- Wholesalers buy stock ahead of demand and sell on 30 to 60-day terms.
- Margins are often thin, so the cost of financing matters.
- Receivables and inventory are your main collateral.
- Seasonal peaks can double your working capital needs.
How financing works in wholesale and distribution
Wholesale and distribution businesses sit between suppliers who want to be paid quickly and customers who want time to pay. You buy inventory in volume, store it, then sell on terms. The bigger you grow, the more cash sits in your warehouse and your receivables.
Most distributors rely on revolving credit secured by inventory and receivables, with factoring for fast-growing accounts and equipment financing for warehouse and fleet.
Common financing needs
Here’s how businesses in this industry typically match their needs to the right kind of financing.
| What you need | Usually the best fit | Why |
|---|---|---|
| Stock up before a busy season | Lines of credit | Draw for the build-up, repay as the season sells through |
| Free cash from slow-paying accounts | Invoice factoring | Advance on large retail and commercial invoices |
| Warehouse equipment and vehicles | Equipment financing | Forklifts, racking and delivery trucks, financed over their life |
| Buy a competitor or a product line | Business acquisition | Add customers and supplier relationships through acquisition |
How NorthMerit can help
Apply once and we’ll connect you with one financing partner who works with businesses like yours. It’s free, and there’s no obligation.
What lenders look at
Lenders look at how fast your inventory turns, how much of it is current versus aged, your receivables quality and your margins. Strong supplier relationships and diversified customers both help.
Because margins are thin, lenders pay attention to whether the cost of borrowing leaves enough profit. Being able to show your gross margin by product line is useful.
Other things partners commonly ask about: inventory build-ups ahead of busy seasons; receivables from retailers; warehouse and fleet costs.
The holiday build-up
A distributor draws $180,000 on its line in September to stock up, and repays it from December sales.
How to prepare
Have your inventory report by age, an aged receivables report, recent financial statements and your main supplier terms ready. Lenders like to see how inventory and receivables move through the year.
Common questions
Is NorthMerit a lender?
Does it cost anything to apply?
Who will contact me?
The right financing, from the right partner.
Apply once. One financing partner who knows businesses like yours. Free, with no obligation.
