Invoice Finance for wholesale is a perfect funding solution if you are running a growing business with a significant amount of money tied up in your debtor ledger through unpaid invoices.
The problem becoming greater and holding you back the faster your business grows? This is where wholesale finance can help with overcoming cashflow issues.
We truly believe that the Wholesale sector is one of the most important sectors that supports the future growth of the UK economy.
What is invoice finance for wholesale?
Invoice finance for wholesalers is a type of funding that allows them to borrow money against the value of their invoices. Invoice finance is also sometimes called accounts receivable financing. Wholesalers typically use invoice finance when they need working capital to grow their businesses, but do not want to take on additional debt.
This type of funding can be used to purchase inventory, hire new staff, new start wholesale business or expand into new markets. One of the main advantages of invoice finance is that it is easy to obtain and does not require collateral.
However, it is important to note that this type of funding can be expensive and may not be the best option for all businesses. When evaluating whether or not invoice finance is right for your business, be sure to weigh the costs and benefits carefully.
Why Wholesalers should consider invoice finance
Invoice finance is an essential financial option for any Wholesaler type business that offers services to businesses on credit terms. We know the importance of making sure that you have cash available to pay sub contractors or just to ensure that you have ready available cash in your bank that can be used to cover your day to day expenses.
By using an asset based lending product such as invoice finance within your business could be the answer for a positive cash flow within the business. We also understand that your workers and suppliers will need paying much quicker than the standard 30 days your clients will take to pay you, this can potentially causing cash-flow issues.
Asset based lending is a perfect fit for any business, it can fill the cash flow hole by advancing up to 95% of the value of the outstanding account once it has been issued to the client. Once you have completed the job and the invoice has been issues to the client, the factor provides the balance of the statement of charges, minus fees.
There is no longer a need for your wholesale business to have to wait to be paid 30, 60 or even 90-day after you have issued an invoice, this is where our finance will support your business. You can finally sleep at night and no longer worry about cash flow issues.
Types of invoice finance for the Wholesale sector:
The Wholesale sector tends to be volatile due to the nature of the industry, the types of finance available for Wholesalers will vary on a number of factors.
To help you work out which type of finance will suit your business, here is a brief guide to the three main options:
Invoice discounting
Invoice discounting for Wholesales is a confidential finance facility when a company’s unpaid invoices are used as collateral for a loan. Invoice discounting companies enable businesses to leverage the value of their sales ledger.
With an invoice discounting company, when sending out invoices to customers a proportion of the total amount becomes available from the lender, which provides your business with a source of working capital throughout the month while you wait for your client to pay their bill.
The benefit of invoice discounting is you maintain responsibility for your sales ledger as well as any outstanding amounts chased and invoice processing. The main difference between this method and invoice factoring is that your customer is not aware that you have taken on cashflow finance. If you prefer to keep the financial arrangement confidential from your customers then discounting may be the right product for you.
You no longer have to wait up to 120 days to receive settlement for your services, and you remain in charge of your own credit control processes, meaning that you continue to chase late payments and therefore your customers are not made aware of any third party involvement.
This type of finance is suited to Wholesalers that have a larger turnover of about £500,000 and do not wish for their client to know they are using a third party lender.
Invoice factoring
Invoice factoring for Wholesalers is when a business sells its sales ledger to a third-party company. It’s a form of factoring finance and will give your business an effective way to improve its cashflow position.
How does invoice factoring work, the lender will provide the credit control service to recover payment of the unpaid invoice.
Factoring companies allow you to release cash from your unpaid invoices quicker than having to wait between 30 to 90 days – and sometimes up to 120 days – for your customers to pay you.
The invoice factoring provider we handle credit control on your behalf, allowing you to concentrate on other areas of the business instead of chasing up late payments.
This type of finance is well suited for Wholesale businesses that have a turnover of about £100,000 per year, it ensures that your clients settles their outstanding bills in a timely manner. One advantage with Wholesale factoring is the lender will chase up all your outstanding invoices with your clients.
Spot factoring
Spot factoring for a Wholesale company is a way to access funds by selling unpaid sales debts to a 3rd party, a spot factoring company, on a one off basis in order to receive payment quicker.
The business will agree rates and fees with a spot factoring company and then decide which account it wants to assign to them. The spot factoring company, once your bill for services that have been completed is verified, will advance a proportion of its value, usually around 70-85%, to the business.
The spot factoring company will then chase up the amount from the client and once paid to them in full will reimburse the business with the outstanding balance minus the agreed fees.
Idea for Wholesalers that have a number of clients, but only wish to factor the slower paying clients. This ensures that there is no longer a need for the odd one or two slow paying clients to drag your cashflow down while your quickest paying clients support your business.
Benefits of Wholesale factoring
- Cash released in 24 hours after invoices are raised
- Receive up to 95% of the invoice amount
- Credit control can be fully managed or confidentially kept in-house
- Improves cash flow for your business
- Negotiate better terms with your suppliers
- Bad Debt Protection can be added to protect against non-payments
It allows you to release funds against the value of invoices within 24 hours of their issue. This means that, rather than wait for your customers or clients to pay, you gain immediate access to cash that can be used to keep the business running as usual, or to grow your business with new clients and contracts.
When it comes to finding the right type of invoice finance for your business, you may find either invoice factoring or invoice discounting provide a better fit.
With invoice factoring the funder will additionally manage your sales ledger on your behalf, with their credit management resource and expertise reducing in-house overheads and improving collection times in general.
How does Wholesale factoring work?
For any business cash is needed to support the business on a daily basis, Wholesale invoice factoring works by bridging the gap between getting paid by your clients and paying suppliers, sub contractors and merchants.
- You supply your services or goods to your customers.
- Send your customer a request for payment and send a copy to the finance company or upload to the online portal.
- The lender will advance up to 75% of the outstanding amount.
- Your customer settles the amount in full.
- The payment clears and we give you the remaining 25% balance minus the finance fee.
How much do Wholesale factoring companies charge?
Whole factoring companies charge in accordance to a number of different factors, so their factoring rates and costs are unique to each client using a variable fee structure.
In most cases some factoring companies will offer a flat fee structure, their total cost will be primarily based on two thing, the discount/factor rate that they offer you and the second the length of factoring period.
Who is eligible for Wholesale finance?
Eligibility for Whole finance is subject to status but not as strict as you may think, if the following apply to you:
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You are registered in the UK
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Minimum turnover £100,000
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Issue invoices.
Frequently asked questions
What is invoice finance for the wholesale sector?
Invoice finance for the wholesale sector is a financial solution where wholesalers can sell their unpaid invoices to a third-party financing company. This allows them to access immediate cash flow instead of waiting for customers to pay their outstanding invoices.
How can invoice finance benefit wholesale businesses?
Invoice finance offers several advantages to wholesale businesses. It provides a consistent and reliable cash flow, enabling them to meet operational expenses, invest in inventory, and pursue growth opportunities without delays caused by late payments from customers.
Are there different types of invoice finance options available for wholesalers?
Yes, wholesalers can choose from various invoice finance options. Two common types are invoice factoring, where the financing company manages the sales ledger and collects payments directly from customers, and invoice discounting, where wholesalers retain control over their sales ledger and collect payments from customers themselves. The choice depends on the level of administrative involvement and confidentiality desired by the wholesale business.
Conclusion
In conclusion, invoice finance presents a valuable and flexible financial solution that can significantly benefit wholesale companies and businesses facing cash flow challenges. By leveraging their outstanding invoices, these businesses can access immediate funds, ensuring a steady flow of working capital to support day-to-day operations and growth initiatives. Invoice finance eliminates the waiting period for customer payments, reducing the impact of late payments and potential cash flow gaps.
This increased financial stability empowers wholesale businesses to seize new opportunities, invest in inventory, and expand their market presence without being constrained by limited cash flow.
Additionally, by outsourcing invoice management and collections to the financing company, businesses can save time and resources, allowing them to focus on core operations and strategic planning. In this way, invoice finance serves as a vital tool in optimizing cash flow, enhancing financial resilience, and propelling sustainable success for wholesale companies and businesses across various sectors.
As a specialists broker in all things funding we are sure we can find a facility that works for you and your business, to apply for finance the process is quick and easy, simply complete the online enquiry. If you prefer a call back please feel free to get in touch on the number above.
Seasoned professional with a strong passion for the world of business finance. With over twenty years of dedicated experience in the field, my journey into the world of business finance began with a relentless curiosity for understanding the intricate workings of financial systems.