Wholesale Loan

Find out all about the different wholesale loan options that can be used to meet your business needs.

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What are common funding needs of wholesale businesses?

Wholesalers refers to the sale and distribution of merchandise to resellers. While wholesalers can be classified into several categories, the main ones include:

  • Merchant wholesalers: Merchant wholesalers purchase products from the manufacturer, and store it before selling it to the consumer.

  • Agents and brokers: Agents and brokers don’t take title to the goods that they deal, but are involved in negotiating the terms of transactions between buyers and sellers.

  • Manufacturers' sales branches and offices: These facilities function as sales offices for distributing the manufacturer’s products at wholesale level.

A wholesale loan can cover a wide range of expenses related to running a wholesale or distribution company. These include:

Inventory purchase

Taking out a wholesale loan can help businesses fulfill a variety of inventory needs, such as having sufficient inventory to fill orders, expanding their offerings to attract a new consumer segment or tapping on bulk discounts to achieve greater cost savings.

Invest in technology

Automation, global expansion, omnichannel selling and B2B ecommerce are key trends emerging in the wholesale distribution space - and businesses will need to invest in technological advancements in order to capitalise on the opportunities that these trends present. This may include taking on a website revamp, cross-border payment technologies, automation tools, customer management softwares or seamless B2B ecommerce solutions.

Marketing activities

In order to promote your products to retailers and institutional buyers effectively, you’ll need to have a robust marketing strategy in place. Generally, wholesale companies rely on a mix of online and offline marketing activities, like email campaigns, content marketing campaigns, referral programs, cold calling, advertising in industry publications and sending out direct mail product samples.

Expand warehouse capacity

Overcrowded loading docks, messy aisles, compromised workplace safety and labour inefficiencies are some of the problems that can result from having insufficient warehouse capacity. External financing options can come in handy for covering the costs of moving to a larger facility, or implementing solutions like adding an extra floor or reducing aisle width to increase the capacity of your current facility.

Manage workforce expenses

To keep your operations running smoothly, you’ll need to have sufficient warehouse staff, along with a team of front office employees to manage the customer relations, finances and marketing aspects of your business. During slow seasons, external financing options can be a handy measure to help you meet your payroll obligations in a timely manner.

What are common types of wholesale loans?

Secured loan

Secured loans require that borrowers pledge assets as a collateral for the loan. Should the borrower default on the loan, the lender may sell off the assets to recover the amount owed. Working capital loans, as well as invoice financing and inventory financing are examples of secured loan options obtained by wholesale businesses.

Unsecured loan

In contrast to secured loans, unsecured loans don’t require collateral, and are approved based on factors like your creditworthiness and strength of cash floor. With alternative lenders, applying for an unsecured loan can be quick and convenient. The streamlined processes, coupled with the flexibility that the loan offers makes it well-suited for covering a wide-ranging array of business needs.

Invoice financing

Invoice financing refers to a short-term financing option that enables businesses to borrow based on their unpaid invoices. It’s a great option for small and medium-sized wholesalers, as these businesses often face a funding gap between the time when payments are made to suppliers, and when they receive payment from customers.

Inventory financing

Inventory financing refers to an asset-backed line of credit or loan made to a business for the purchase of products or inventory. These inventory then serve as a collateral for the loan. This financing option is typically used to fund short-term business needs, such as covering cash flow gaps or purchasing additional inventory to prepare for the peak season.

Tips to help you prepare for a wholesale business loan application

Obtaining external financing can be an uphill task for small and medium-sized wholesale businesses, but with the right preparation, the process can be a lot smoother. Here are a couple of tips that can give you a leg up in getting your funding approved:

Develop a clear action plan

Mapping out a comprehensive business plan - including projections for your sales forecast, cash flow and income - will help potential lenders understand in detail about what they’re investing in, and provide them with a clear notion of where you’ll be at over the next six months or in a year. It’s also helpful to outline your repayment strategy, as this demonstrates that you’ll have the capacity to make consistent repayments over the long run.

Demonstrate that your goods have good resale value

With inventory financing, your lender needs to determine that your products have good resale value. Keeping this is mind, you’ll need to show that you’re able to sell your current inventory quickly, have a track record of consistent sales and goods that are kept in prime condition. In your proposal, clearly indicate that you’ll be using your inventory loan to purchase products with a short sales cycle.

Where can I get a loan for my wholesale business?

Getting external financing is often a necessary measure for wholesale businesses seeking to expand their venture or fund their day-to-day expenses. Yet, obtaining a loan can prove to be tedious and challenging, largely due to stringent requirements and lengthy onboarding periods of traditional lenders.

With online lending platforms like Aspire, loan application processes are convenient, streamlined and speedy - submitting an application takes a matter of minutes, and you’ll be notified of your loan approval status in just 24 hours.

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