Cash flow in the wholesale sector
Wholesale businesses sit between manufacturers and retailers. They typically need to pay suppliers quickly, often within 30 days or less, while extending 60 to 90-day credit terms to their retail and commercial customers. This working capital gap is structural and grows as the business scales.
Invoice finance is particularly effective for wholesalers because the invoice values are often high, the debtor base is typically creditworthy commercial businesses, and the invoicing is straightforward with clear delivery evidence. All of these factors support high advance rates and competitive pricing.
Combining invoice finance with stock finance
For wholesalers holding significant stock, invoice finance can work alongside an asset-based lending or stock finance facility. The stock facility finances the purchase of inventory, and the invoice finance facility releases cash once goods are sold and invoiced. Together they provide a complete working capital cycle, reducing the need for expensive overdraft facilities.
Typical advance rates and costs
Wholesalers with clean, spread debtor books and strong customer quality typically achieve advance rates of 80 to 90% of invoice face value. The service charge is typically 0.5 to 1.5% of turnover and the discount rate is usually 1.5 to 3% above base rate. Total annual cost as a percentage of turnover is often well below the cost of a comparable overdraft facility.
Eligibility
- UK limited company in wholesale distribution, import or trade
- B2B sales ledger with invoices for delivered goods
- Minimum 12 months trading history
- Spread debtor base (no excessive concentration in a single buyer)
Frequently Asked Questions
Can I use invoice finance if I also import goods from abroad?
Yes. Wholesalers who import often combine invoice finance with trade finance or a letter of credit facility to fund imports. Invoice finance releases cash from UK sales while trade finance funds overseas purchases.
What if my biggest customer accounts for over 50% of my turnover?
Concentration risk is a common issue for wholesalers. Lenders will typically apply a debtor concentration limit. You may still be able to finance that debtor's invoices, but the lender may cap the advance against that single buyer. Credit insurance can help manage this.