It’s no secret that, in many industries, the art of good wholesaling is the art of good business. All entrepreneurs know that – within the bounds of sustainable ethics and legal requirements – the ultimate goal is to buy low and sell high. This is the principle that drives profit margins in a supply chain; and, when you wholesale, it becomes significantly easier to execute.
“Wholesaling,” in the words of Investopedia, “is the act of buying goods in bulk from a manufacturer at a discounted price and selling to a retailer for a higher price […] [it is] one step in the supply chain that starts with a supplier of raw materials and ends with a sale to an end-user.” (Investopedia.)
Naturally, and as with all enterprises, wholesale companies require capital in order to maintain and grow their operations. Often, business owners turn to lenders to acquire a business loan, and thereby gain the funding needed to thrive.
Here at Aurora Capital, leading UK funding specialists, we have extensive experience in helping wholesale companies take the next step and access the money they need to grow as a business.
In this article, we’ll be taking a closer look at the different types of lender, your credit options and the finance schemes available to answer the question: what are wholesale business loans?
What loans can wholesale businesses apply for?
Of the 105,000+ UK wholesale enterprises currently in operation (Statista), a significant portion either do or have at some stage relied on an external funding facility in order to achieve their goals.
Depending on the nature of the business and other individual factors, the type of capital loan scheme wholesalers seek can vary. Below, we’ll walk you through the most popular wholesale business loans.
Recovery loan
In the wake of the global pandemic, the government introduced the Recovery Loan Scheme to help businesses recover from damage to cash flow and the drop-off in trade. This scheme allows companies to seek up to £2 million; a recovery loan is a flexible funding option, and may be used for any legitimate business purpose.
Unsecured business loans
With no need to put up collateral and capable of being used essentially however your wholesale business sees fit, unsecured business loans are a popular route to capital for many companies. A lender will evaluate your credit situation (including credit score, credit history and risk) to determine the loan specifics; this means that interest rates can be variable.
Secured business loans
Conversely, secured business loans do require some form of collateral (such as equipment, property or, in some cases, ‘soft’ assets), and as a result generally offer much lower interest rates than unsecured loans. This is because, with that collateral security, lenders perceive lower levels of risk.
Merchant cash advance
A merchant cash advance scheme or facility is based specifically on debit and credit card sales. It’s especially popular in retail financing, where a significant proportion of sales are likely to be conducted electronically. Merchant cash advances involve a lending organisation offering a lump sum payment, which you as the wholesaler will repay via an agreed percentage of card transactions.
Invoice finance
With invoice finance, you’ll borrow capital against the value of unpaid and currently-outstanding invoices. Wholesale enterprises are typically only required to repay the money once the invoice has been paid; in this way, it is considered a secure method of business financing.
Revolving credit facility
A revolving credit facility means wholesale businesses can borrow any amount up to an agreed limit. You’ll be able to draw however much you need from the fund, and generally, interest is only payable on the amount borrowed from the lender – not the limit of the facility.
How do wholesale loans work for business?
Whichever funding option you decide to seek, the wholesale financing application process generally follows the same steps.
The first stage is to identify the lender or lenders who offer a viable finance option, and submit your loan application. The lender will then take some time to assess your application, determine its eligibility and establish the amount of risk it presents (in order to set the interest rates).
From there, it’ll be up to your wholesale business to decide whether or not to agree terms. If the loan conditions are acceptable and practical for you, you’ll be granted access to the capital.
With so many wholesale finance lenders to consider, it can be quite a task to pore over your options and find the best source of business lending.
The good news is, on this front, Aurora Capital can do the hard work for you. We compare 50+ lenders from across the industry, connecting entrepreneurs with the wholesale business loans they need in a reliable and efficient way. Contact us today to start the application process.
A word on wholesale financing eligibility criteria
When it comes to wholesale financing, eligibility criteria can vary a fair amount, depending on the type of loan and the lender you choose.
However, there are some key factors that most lenders will consider when assessing your wholesale business loan application. These may include your credit score and history, revenue and profitability, years in business, and the purpose of the loan.
When addressing the question of how to secure funding for your business, the importance of a clear business plan and financial statements (to demonstrate your ability to repay the loan) cannot be overstated.
Our funding specialists will be happy to guide you through the various eligibility criteria and help you find the right wholesale financing solution for your business needs.
Delineating the business loan benefits for wholesale companies
As a wholesale company, you play a crucial role in the economy by connecting manufacturers and suppliers with retailers and consumers. However, these business activities often require substantial amounts of working capital to finance.
Business loans can provide wholesalers with the funding they need to manage inventory, expand their business, and improve their financial position. Here are some of the key benefits that wholesale companies can enjoy by taking out a business loan.
| Wholesaler business loans: enterprise benefits | |
| Increased purchasing power | A business loan gives wholesalers the ability to buy more inventory, necessary for increased sales and revenue. |
| Improved cash flow management | Wholesale businesses often have large accounts receivable balances – this can create cash flow challenges. A business loan helps navigate the periods between when invoices are due and when funds are available. |
| Opportunity for expansion | Wholesale businesses may need to expand in order to reach new customers, or enter new markets. External funding can provide the necessary capital to invest in new facilities, equipment, and personnel. |
| Flexibility | Depending on terms stipulated by the lender, loan conditions can be tailored to meet your unique needs, such as the loan amount, repayment terms, and interest rates. |
| Build credit | Timely payments on a business loan improve your credit score and build a positive credit history. This will help you qualify for larger loans and better rates in the future. |
Solidify your place in the supply chain with secure funding
As a wholesaler, you’ll know that the difference between the final retail price of a product or service, and the price you supply it for, is the zone in which you drive the most profit.
This is true for both large and small businesses. Let’s say you’re a small enterprise, wholesaling pet supplies to outlet stores. Of course, you want to deliver your products cost-efficiently, but you also need to generate profit – your business survival depends on striking this balance.
When you need access to a cash injection, as a way of investing in your goals as a business, taking on a wholesaler loan is undoubtedly your best bet. Again, though, we can’t over-emphasise the importance of credit in this scenario. There are several things that can affect your credit score, and some (such as wider economic conditions) are beyond your control.
However, that doesn’t change the fact that bad credit is likely to lead to negative lending decisions. A lender will be unlikely to offer loans, and other lenders will follow suit; and, even if they do, you may need to accept substantial interest rates and fees to access the capital.
To find out what types of loan your business could be eligible for, and get a clear view of your financial funding options, get in touch with our team today. We’ll make an honest evaluation of your situation and recommend pathways to capital, giving you everything you need to take your wholesale enterprise from strength to strength.
