Factoring for distributors and wholesalers is a financial solution that helps businesses improve cash flow by selling their unpaid invoices to a factoring company. Instead of waiting 30, 60, or even 90 days for customer payments, factoring allows businesses to receive an advance on their invoices-typically up to 90% of the invoice value-within 24 hours. The factoring company then collects payment from the customer and sends the remaining balance, minus a small fee. This helps wholesalers and distributors maintain steady cash flow to purchase inventory, cover operating costs, and grow their business.

Invoice factoring provides immediate working capital by converting outstanding receivables into cash. This allows wholesalers and distributors to:

• Purchase more inventory without waiting for customer payments.
• Take advantage of bulk discounts from suppliers.
• Cover payroll, rent, and other operating expenses without financial strain.
• Expand business operations by investing in new markets or products.
• Avoid debt-unlike loans, factoring doesn't require collateral or monthly repayments.

Most factoring companies have simple qualification criteria for wholesalers and distributors, including:

• B2B (business-to-business) invoices with creditworthy customers.
• Unpaid invoices with net terms of 30+ days.
• A business that is free of liens or can obtain lien subordination.
• Consistent invoicing with verifiable transactions.

Factoring is ideal for startups, growing businesses, and companies with cash flow gaps, as approval is based more on customer creditworthiness than the business's credit history.

Factoring fees vary based on factors like invoice volume, customer creditworthiness, and industry risk, but typically range from 1% to 5% of the invoice amount. Some key pricing factors include:

• The advance rate (percentage of the invoice paid upfront, usually 80-90%).
• The factoring fee structure (flat fee vs. tiered rates).
• The length of time it takes for the customer to pay.
• Additional services such as credit checks, collections, and back-office support.

Factoring is often more cost-effective than traditional financing because it provides fast cash without taking on debt.

Factoring offers several advantages over business loans and lines of credit, including:

• Faster approval-factoring can be set up in days, while loans take weeks or months.
• No debt-factoring advances cash from unpaid invoices rather than creating new liabilities.
• Flexible funding-the more invoices you generate, the more cash you can access.
• No collateral required-factoring is based on your customers' credit, not yours.

Improved financial stability-consistent cash flow helps wholesalers avoid supply chain disruptions and take advantage of growth opportunities.