Funding for Wholesale Businesses
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Best Funding Options for Your Wholesale Business
At Aurora Capital, we specialise in finding the most appropriate funding solutions for wholesale businesses. We understand that your funding requirements may vary, and we offer several types of business loans with differing eligibility criteria, funding values, and usage options.
Whether you need to address a short-term cash flow issue or secure financing to purchase new inventory, we have a solution that can help.
Unsecured Business Loans
You might not always have assets to use as collateral for a loan. In such cases, unsecured business loans can be an ideal option as they don’t require collateral. However, it’s worth noting that unsecured loans typically have higher interest rates than secured loans due to the increased risk to the lender as a result of the lack of collateral. While you may not be able to borrow as much with an unsecured loan as you would with a secured loan, you can still access a substantial amount of credit. Unsecured loans are versatile and can be used for any business-related expense, making them an appropriate option for wholesale businesses. The loan amounts usually range from £1,000 to £500,000 and can be repaid over a maximum period of six years.
Revolving Credit Facility
For wholesale businesses, revolving credit facilities can provide a flexible credit line that functions similarly to an overdraft. This credit option can be advantageous for businesses that require a financial cushion to address unexpected expenses or cash flow challenges. Revolving credit facilities typically offer loan amounts ranging from £10,000 to £2 million and can be borrowed over a two-year period. As funds are borrowed, the available credit decreases, but once the borrowed amount is repaid, the original amount becomes available again and can be used repeatedly as needed.
Recovery Loan Scheme
For wholesale businesses, recovery loans can provide much needed help to overcome financial difficulties. This type of borrowing is appropriate for businesses that have experienced setbacks and require a larger sum of money to move forward. Recovery loans typically offer loan amounts ranging from £25k to £500k and can be borrowed over a maximum period of six years.
Merchant Cash Advance
For wholesale businesses, merchant cash advances are a borrowing option designed to provide quick access to funds with flexible repayment terms. Unlike traditional loans, this option involves a lender providing an upfront cash advance in exchange for a percentage of future credit and debit card transactions. Repayment of the advance and associated fees is typically done through automatic daily or weekly deductions from the business’s credit card sales until the loan is fully repaid. For instance, a lender may agree to deduct 10% of every card transaction until the loan and agreed interest are paid off. The amount repaid increases with higher sales, facilitating faster loan repayment. However, during slow sales periods, there’s no pressure to make high payments, and businesses only pay what they can afford.
It’s not uncommon for wholesale businesses to offer payment periods of 30, 60, or 90 days. However, this can pose challenges to cash flow management. When multiple invoices are outstanding, your business might not have immediate access to funds to purchase new stock or pay suppliers and staff until the previous invoices are paid. Invoice finance can help address this issue. With this option, a lender will pay up to 90% of the value of your outstanding invoices, and you pay the lender back when your clients settle their accounts, plus interest.
Using Finance to Purchase More Stock
Wholesale businesses hold onto a large amount of stock to sell onto their customer base. A Business Loan is a great way to increase your stock holding or look to bring in a new product that you haven’t been able to do before. Not only does this allow you to potentially grow your business, but funding may also allow you to save some money from your suppliers. By buying in bulk or purchasing a large order it may allow you to negotiate better payment terms with your suppliers, which in turn will add to your bottom line.
There are many different types of loans which can be used for different things, so it’s important to consider all your options before deciding which loan to go with.
Key benefits of working with Aurora Capital
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How to Secure the Right Funding for Your Wholesale Business
Choosing the right type of funding can be tricky. Here are some tips to help you secure the right funding for your wholesale business.
- Firstly, consider the different loan options available to you. There are several types of loans to choose from, including term loans, lines of credit, invoice finance, and merchant cash advances. Each type of loan is designed for specific purposes, so it’s important to choose the one that best suits your needs.
- Secondly, affordability is key. When considering funding options, ensure that you can afford the monthly repayments. Failure to do so could lead to financial difficulty or even defaulting on the loan. This may mean compiling a business plan and forecasts to show to lenders should they need it as a reference to determine how much you can borrow.
- Thirdly, collateral may be required for certain types of funding, such as equipment financing. In this case, make sure you have equal value assets to secure the loan, or consider whether you’d be prepared to offer a personal guarantee.
Lastly, consider how much money you actually need to borrow. Overborrowing can lead to unnecessary interest payments, so make sure to only borrow what you need.
Factors Lenders Consider When Evaluating Loan Applications
Every lender has different requirements when making a funding decision, but some of the fundamental things they look at include:
- Credit Score: Lenders typically use credit scores to evaluate a borrower’s creditworthiness. A good credit score demonstrates that you have a history of responsibly managing credit, which increases your chances of getting approved for a loan.
- Business Revenue: Lenders also consider your business’s revenue and profitability. They want to ensure that you have enough revenue to repay the loan, so they’ll likely look at your income statements, balance sheets and cash flow statements.
- Industry and Market Trends: Lenders may also consider the industry and market trends in which your business operates. They want to ensure that your business has a stable and promising future and that you’re aware of the potential risks and challenges, especially if you’re asking for a higher loan amount.
- Debt-to-Income Ratio: Your debt-to-income ratio is the percentage of your monthly income that goes towards paying debt. Lenders use this ratio to determine if you have the capacity to take on additional debt.
Understanding these factors can help you prepare a strong loan application that meets the lender’s criteria. If you’re unsure on any of these points, speak to a member of our team to find out how you can improve your application and boost your chances of getting approved.
Exploring the Different Types of Wholesale Funding with Aurora Capital
At Aurora Capital, we are business loan brokers. We work with 50+ lenders, all offering different types of finance to suit your unique borrowing needs. Whether you need to stem a short-term cash flow issue, or you need a helping hand to expand your business into a new market, we can help you find a lender that will help you get where you need to be.
Some of the most common types of wholesale funding options we provide are:
- Secured business loans
- Unsecured business loans
- Merchant cash advances
- Revolving credit facilities
- Invoice finance
If you want to find out more about which credit solution could be best for your business, contact us.
Wholesale funding FAQs
How much can you borrow?
The amount you can borrow depends on the type of finance you go for. Generally, we assist businesses with borrowing needs between £10,000 and £2 million, but lower and higher amounts are available (collateral depending).
How long does it take to make a decision?
At Aurora Capital, lending decisions are made quickly. Applying online takes just minutes and decisions are generally made within 48 hours, with money often in your account in just a few days.
Does applying for a wholesale business loan affect my credit score?
No, applying for wholesale funding through Aurora Capital will not impact your credit score.
What are the requirements I need to meet for a successful loan application?
The requirements you need to meet will depend on the lender and the type of finance, but as a general rule of thumb, we only work with UK-based businesses that have been trading for six months and have an annual turnover of £100,000+.
We cover a multitude of finance options.
Aurora Capital is here to help. Navigate our range of alternative funding options to find out more.
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