5 Ways That Your Wholesale Business Can Utilize a Short-Term Working Capital Advance
When it comes to running your wholesale business it’s important to ensure that you always have the capital on hand to keep operations running smoothly while not disrupting your services, but this can be a challenge especially when large upfront costs eat away at your working capital. What is the best way to be able to meet the needs and expectations of the clients that you supply without sacrificing your own capital immediately?
A short-term working capital advance can be a great tool for wholesale business owners to meet and overcome the day-to-day challenges that come with running a successful enterprise. Let’s take a look at five ways that your wholesale business can use short-term working capital to effectively meet the needs of your clients.
What Is A Short-Term Working Capital Advance?
A working capital advance is a type of funding provided to a business to help it manage its day-to-day operational expenses. It is essentially a short-term loan that can cover expenses such as inventory purchases, payroll, rent, and other overhead costs.
The amount of the working capital advance is typically based on the business's cash flow and revenue, as well as its creditworthiness. Sometimes, a lender may require collateral to secure the loan, such as business assets or accounts receivable.
Working capital advances are often used by businesses that have seasonal fluctuations in revenue or need to make large investments in inventory or equipment. They can be an effective way for businesses to maintain their cash flow and keep their operations running smoothly during financial stress.
How Can A Short-Term Working Capital Advance Help A Wholesale Business?
1. Inventory Management
Inventory management is one of the most crucial aspects of running a successful wholesale business. It doesn’t matter whether your wholesale business is supplying products to restaurants or retail, supply shortages, and bad inventory management is a surefire way to make your clients upset and consider going elsewhere.
Wholesale companies can use short-term working capital loans to purchase additional inventory to meet the demands of peak seasons or unexpected spikes in sales. This will help them avoid stock shortages and meet the needs of their customers.
2. Purchase Order Financing
Purchase order financing is important to wholesale businesses because it provides you with the opportunity to fulfill large orders from customers without requiring them to use their own cash reserves or credit lines. It’s a great way to attract more customers while providing businesses with the flexibility to make larger purchases. While this builds stronger relationships with clients, it also comes with the payoff that you have to wait for the funds over time, unlike offering B2B Buy Now, Pay Later where you may receive all of the payment upfront from a third party.
Wholesale business owners can use short-term working capital loans while they wait for finance purchase orders to be paid in full and then use the funds that clients pay back over time to pay off the short-term working capital advance. This will help manage cash flow and reduce the risk of delays caused by funding constraints. However, it is important to ensure that you do not overborrow in case a client defaults on their payments.
3. Marketing and Sales Expansion
One of the easiest ways to accomplish the growth of your wholesale business is by taking the time to market your products to more people in order to drive up sales. Marketing can be a costly endeavor, especially if your marketplace is crowded.
Wholesale companies can use short-term working capital loans to fund marketing and sales initiatives to expand their customer base and increase revenue. This can include trade shows, advertising, and promotions. Using short-term working capital advances is a great way to fuel a wholesale business’s marketing machine.
4. Staffing and Training
Growing a wholesale business comes with increased stock and demand, which may require owners to also grow their workforce. Hiring new employees, while also ensuring that they are correctly trained to manage your business efficiently, can be costly but this is a necessary cost to ensure that you are providing the best service to your clients.
Wholesale companies can use short-term working capital loans to hire additional staff or provide training to existing employees. This will help improve operational efficiency and customer service.
5. Warehouse Space Expansion
As a wholesale business succeeds and is able to purchase increased inventory, the next logical step would be to expand the space that its warehouse currently has so that it can continue to grow its business.
Wholesale companies can use short-term working capital loans to expand their warehouse space to accommodate growing storage needs. This will help improve their ability to store and manage goods, reducing the risk of stock shortages and increasing overall efficiency.
Short-Term Working Capital Advance Options
$25K - $2M
4 - 16 months
Minimum of 1 year in business, a minimum $50K monthly revenue, a business bank account, and a personal credit score of 625
$5K - $250K
3 - 24 months
Minimum of 1 year in business, a minimum of $100k in annual revenue, business bank account, personal FICO Score of 625
$5K - $2M
6, 12, or 24 months
Minimum of 2 years in business, a minimum of $50K in annual revenue, $12K in annual credit and debit card sales, no credit score minimum
$2.5K - $500K
1 - 3 years
Minimum of 2 years in business, may have to provide collateral and a “strong” credit score.
Up to $1.4M
Varies based on your credit card transaction volume.
Minimum of 6 months in business, a minimum of $60K in credit card sales or $144K minimum among all transactions, and a minimum credit score of 500.
Backd’s Working Capital: The Financial Tool For Your Wholesale Business
When it comes to finding a short-term working capital advance to help your wholesale business grow, Backd is here to help.
Backd’s Working Capital Advance is one of the best on the market with competitive rates and terms that actually allow your business to grow. Backd offers working capital advances of $25K up to $2M with terms of up to 16 months.
If you’re considering taking out a working capital advance then apply with Backd today. Our application only takes 3 minutes to complete with funding arriving in your account in just 24 hours. Don’t wait to get the funding that your business needs to grow, take the first step and apply with Backd today.