Small- and medium-sized wholesalers rely on being able to fill orders for retailers and other businesses to make money. When inventories are low, it may be difficult to fill a larger order, and financing may be needed.
With small businesses often struggling to obtain a loan from a bank, purchase order financing could prove beneficial for wholesalers when big orders are received.
It appears as though wholesalers may need to increasingly rely on financing in the near future, with inventories unexpectedly falling for the third consecutive month. According to the U.S. Department of Commerce, inventory levels dropped 0.2 percent in June, following a 0.6 percent decrease in May. Economists surveyed by Bloomberg called for a 0.4 percent increase in inventories. With the decline, wholesalers had enough product on hand to last 1.17 months at the current sales pace.
Should inventory levels remain depressed, wholesalers could struggle should an order come in from a big-box retailer such as Target or Walmart. Fortunately, purchase order financing is available to help businesses take advantage of these potentially game-changing opportunities.
When a large order comes in, small- to medium-sized wholesalers may first turn to a bank for a traditional loan. However, smaller companies are often turned away due to limited available capital or a poor credit score.
Businesses who are told "No" by a bank, can utilize purchase order financing, which enables wholesalers to obtain up to 100 percent of the funds needed to fill an order. Essentially, this type of lending agreement allows companies to have the opportunity to grow without tying up too much capital. Additionally, owners of these small wholesalers don't have to sell part of their company to financiers to help fund an order, which allows them to retain 100 percent equity.