Wholesalers face a number of financial challenges, not least of which include smaller margins and higher overheads. Plus, the entire industry suffers from late paying customers and has to offer extended payments terms, sometimes up to 120 days, to win business.
The result is inevitable and obvious. Wholesales have to finance their operational costs until they get paid, which puts them and their businesses under significant pressure and inhibits their ability to grow and develop further.
The key to a successful wholesales business is managing cash flow and it is almost a fine art, securing payment whilst ensuring a reliable stock position is imperative to success.
For those operating overseas, payment can be delayed even further, as the time taken to ship and deliver products overseas extends the payment process considerably.There are also additional risks if trading in foreign currencies, and wholesales also need to check whether buyers are creditworthy, and obtain references where necessary. Everything about the international sales process is extended and more complicated.
Commercial finance products are widely used across the wholesale sector, with lenders typically offering bespoke facilities to address the specific financial challenges wholesalers face. Invoice factoring (which involves ‘selling’ the outstanding debt in the sales ledger) can breathe new life into a business that typically has to wait many days to be paid. It ensures cash is available more quickly, it provides the certainty that enables a business to plan and develop, and it reduces operational costs.