Manufacturing & wholesale
The broader guide.
Industry guide
Funding for wholesale distributors
Distribution is a margin-and-turns business: buy in volume, hold, sell on terms, repeat. Financing cost lives inside a thin margin for as long as the stock sits and the customer waits. The right facility scales with sales; the wrong one eats the margin.
How the money moves
Inventory is bought from manufacturers on terms or with deposits, held in a warehouse, and sold to retailers or contractors on net-30 to net-60. Gross margins are often modest; turns and operating efficiency decide profit. Costs: warehouse, fleet or freight, staff, and inventory carrying cost. The cycle repeats continuously, so the financing need is permanent and should be structured that way.
Two worked scenarios
Scenario A: $400,000 of inventory turning five times a year, customers on net-45
The distributor permanently finances roughly 70 days of sales. An asset-based line secured by inventory and receivables (hypothetical 12% APR on an average $300,000 draw) costs about $36,000 a year, about 1.5% of $2,000,000 of annual sales. Factoring the receivables alone is another structure. An advance cannot fund a permanent need without perpetual renewals.
Scenario B: a new product line with a $60,000 opening order
Supplier terms or a deposit arrangement first; then inventory financing or the existing line. At an 18% gross margin, a hypothetical advance at 1.22 over 16 weeks ($14,400 in cost) would consume most of the line’s first-turn margin.
Hypothetical numbers, labeled as illustrations; not quotes.
What fits what
| Need | Usually fits | Usually doesn’t |
|---|---|---|
| Ongoing inventory and receivables | Asset-based line; factoring | Advance |
| Opening orders for new lines | Supplier terms; inventory financing | Advance |
| Warehouse equipment and fleet | Equipment financing | Advance |
| Acquisition or facility | SBA (education); term loan | Stacked advances |
Questions specific to this business
- What are my turns and gross margin by product line, and which lines cannot bear financing cost?
- What advance rates will the lender apply to inventory versus receivables?
- Are early-pay supplier discounts worth more than the financing cost of taking them?
- Do my largest customers exceed concentration limits?
Watch for. Financing slow-turning lines at factor rates converts thin margin into loss.
What Fast Mula is and isn't. Fast Mula helps you compare business-funding structures and submit one inquiry. Nothing on this site is an offer, approval, guaranteed rate, or guaranteed timeline. Any funding depends on a provider's own review, and terms vary by state.
Common questions
What is an asset-based line of credit?
A revolving line whose limit is set by a formula on eligible inventory and receivables (the borrowing base), reported periodically. It scales with sales and is the standard tool for distribution.
Related
Inventory financing
Turnover and margin.
Working capital formula
The ratio and what moves it.
Manufacturing
Materials, WIP, machinery, long receivables.
Retail boutiques
Buying two seasons ahead; markdowns.
Wholesale distribution? See what fits
Tell us about the timing, the need, and the numbers.