Invoice factoring guide for distribution and wholesale companies

For wholesalers, distributors or other companies that are part of the supply chain, getting a large order that will bring your product to market is only half the battle.

Once you’ve landed the order, you’re then faced with the challenge of getting paid in a timely manner. And this may include clients that stretch out their invoice payments, which may interrupt your ability to meet financial obligations and continue the order cycle.

Invoice factoring for distribution and wholesale companies can mean accelerating the cash flow cycle that every business experiences, by taking your near current assets — your unpaid invoices — and turning them into much-needed working capital.

In this guide on invoice factoring for distribution and wholesale companies, you’ll learn:

Challenges facing distribution and wholesale companies

Why should distribution and wholesale companies use invoice factoring?

What can a distribution or wholesale company expect with invoice factoring?

How can a distribution or wholesale company qualify for invoice factoring?

Invoice factoring: regulating the cash flow cycle for distribution and wholesale companies

Challenges facing distribution and wholesale companies

Often, to remain competitive with shifting market conditions, companies working in the wholesale and distribution industry need to pivot and be agile in order to manage supply chain events, labour shortages and unforeseen rises in cost of goods.

It’s also common for distribution and wholesale companies to have suppliers who need payment in full before they ship the products that are needed to complete an order.

Without a continuous influx of cash – those working in wholesale and distribution may find it challenging to restock, pay company overhead or their employees.

Ultimately, this dance that takes place between delivering your order and getting paid can also cause interruptions in your business cycle and can affect your company’s ability to expand and take on more orders.

Solution:

For Dig It Apparel Inc., the chance to grow their business happened quickly when the company’s appearance on a popular TV show sparked a large order from a well-known North American retailer for their line of utility/gardening gloves specifically targeted to women.

The company didn’t have the cash flow to manufacture and ship such a large order or wait up to 60 days for the retailer to pay its invoice. However, they also weren’t large enough to qualify for bank financing.

Liquid Capital’s invoice factoring process proved to be the ideal interim solution that allowed Dig It Apparel to cover its manufacturing costs, take advantage of opportunities to expand and later obtain traditional financing.

Invoice factoring cash flow challenges for distribution and wholesale companies

Benefits invoice factoring for distribution and wholesale companies

Why should distribution and wholesale companies use invoice factoring?

If you’re experiencing a gap between delivering your product and receiving payment, the invoice factoring process can advance the working capital you need to cover your cost of goods sold and your expenses.

When you factor your invoice with Liquid Capital, we will provide you with the cash you need to reload, allowing you to go back out into the market and make more sales, continuing the cycle.

For new businesses without an extensive sales track record, the prospect of seeking commercial loans may seem challenging. Unlike traditional financing options, the invoice factoring process also doesn’t look at how long you’ve been in business or require the same types of documentation.

Invoice factoring also means you don’t have to consider taking in more investment into your company as you grow, including bringing on additional shareholders or selling equity in your business, or straining close relationships by taking on loans from your network.

What can a distribution or wholesale company expect with invoice factoring?

Invoice factoring is incredibly easy to learn, understand and implement. Here’s how invoice factoring works:

After approval, we will advance your business up to 85% of the value of your invoices.

We will collect payment from your customers and we’ll pay you the remainder of the balance (less applicable fees).

You’ll be able to view invoices in our real-time 24-hour online reporting system, where you’ll have full access to funding status.

Invoice factoring is a flexible solution for distribution and wholesale companies , as you are able to decide how long to use invoice factoring services. We won’t lock you into a long-term contract. If you have months where you have adequate cash flow and don’t need to factor your invoices, you are able to opt-out of the process.

How invoice factoring works for distribution and wholesale companies

How distribution and wholesale companies qualify for invoice factoring

How can a distribution or wholesale company qualify for invoice factoring?

For companies in the distribution and wholesale sector, the invoice factoring approval process starts by contacting your closest Liquid Capital office (no credit checks or registrations are required or executed at this point). Once your initial form is filled out, you’ll complete a more detailed application and the Liquid Capital underwriting team will review the financial health and creditworthiness of your customers — including credit reports, references and opportunity analysis.

We’ll also ensure that your invoices are full and final for services rendered or delivery of a product, that they set out clear terms and conditions, contain all relevant information for payment and that you’ve received verbal or written confirmation of approval.

If your business and accounts receivable clients are in good standing, we’ll approve you for factoring and perform ongoing credit monitoring.

Invoice factoring: regulating the cash flow cycle for distribution and wholesale companies

For many in the wholesale and distribution sector, delayed invoice payments are a common obstacle, which may put your company at risk of having to pass on chances to take on more orders. Taking advantage of invoice factoring during the growth phase can help companies confidently move through these challenges and capitalize on expansion opportunities with peace of mind.

“We want to see our clients succeed, and we’ll go above and beyond to help you get to where you want to be. If you’re experiencing cash flow shortages, invoice factoring with Liquid Capital can bridge the gap and help you achieve your growth goals.”

Liquid Capital Principal

Cash flow cycle for distribution and wholesale companies

There’s a reason we’re North America’s leading invoice factoring provider.

Need more information about invoice factoring?

We’re ready to help you meet any immediate cash flow needs. Get in touch with us to book a free consultation call, and discover if factoring is the right fit. Or visit our Invoice Factoring FAQ page to read the answers to our most frequently questions.