Wholesale and distribution financing

The financing challenge

Wholesale financing may use revolving credit, receivables finance, inventory lending, or purchase-order structures. Each addresses a different stage of the order-to-cash cycle. The useful question is when money is needed, which assets or orders support it, and when customer receipts can repay the advance.

Build the funding case

Map supplier deposits, manufacturing lead times, shipping, storage, customer delivery, and payment terms. Build the forecast using landed costs and realistic collection dates. Show concentration by supplier, customer, and product. A growing order book should be connected to available inventory and fulfillment capacity rather than treated as cash already earned.

Pressure-test the plan

Returns, damaged goods, tariffs, currency changes, and slow-moving stock can reduce margin and collateral value. A borrowing base can contract if invoices age or inventory becomes ineligible. Check minimum volumes, reserves, reporting, and security conflicts when combining facilities. Avoid counting the same receivable twice in separate funding plans.

Map every handoff between order and collection

Build one timeline from the supplier deposit through production, transit, customs, warehousing, delivery and customer payment. Identify which party owns the goods at each stage and the currency of each obligation. A purchase order, goods in transit, stock on hand and an issued invoice are different forms of evidence. Do not assume a single financing product advances against all of them.

Separate the size of the order book from the size of the funding gap. Supplier credit and customer deposits can reduce the gap, while longer transit or payment terms can increase it. Compare a purchase-order structure, an inventory facility, receivables finance and a revolving line against the actual stage needing cash. For Canadian exporters, EDC may support financing through a financial institution; that requires its own eligibility review.

Source: BDC: inventory financing · OCC: accounts receivable and inventory financing · EDC: Export Guarantee Program

Work through a realistic scenario

A fictional distributor receives a $300,000 customer order and must pay $180,000 for goods, plus $20,000 freight and handling. A $60,000 customer deposit leaves $140,000 to fund before final collection. If a supplier allows $40,000 to be paid after the customer’s final payment, the peak gap falls to $100,000. If the customer pays late, that assumption fails. The example excludes overhead, tax, fees and currency changes, and does not establish that the order or inventory is eligible collateral.

Keep facilities from depending on the same cash twice

Reconcile the collateral and repayment plan across existing lenders. The same invoice cannot simply be counted as full support for unrelated funding proposals without considering their rights. Build a downside case in which the largest customer delays payment and slow stock loses value. Ask how borrowing-base reserves change and whether loan repayment leaves enough cash for the next supplier order.

Record the cash required for replacement stock after the current order closes, so repaying today’s facility does not stop tomorrow’s deliveries.

• At which stage is cash needed, and what evidence exists then?
• Which party owns goods in transit or held by third parties?
• Do customer and supplier terms support the expected repayment date?
• What security and repayment rights overlap across facilities?

Your next-step checklist

• Order-to-cash and landed-cost model
• Receivables and inventory aging
• Supplier and customer concentration
• Eligibility, reserves, and security across facilities