Wholesalers and distributors use a merchant cash advance to stock up for a new customer, take a supplier's volume buy, build seasonal inventory or bridge customers who pay on net-30 to net-60 terms. You receive a lump sum and deliver a share of future receivables through fixed daily or weekly payments. InstaFunders funds $10,000 to $2,500,000 for distributors with 12 months+ in business and $50,000+ in monthly deposits.
The distributor's squeeze
A distribution business sits between two sets of payment terms that rarely line up. Suppliers often want payment in 10 to 30 days, or up front for a new product line or a new account with them. Customers, especially larger retailers, contractors and restaurant groups, expect 30 to 60 days or more. Every dollar of inventory you buy is cash out of the building for a month or two before it comes back.
Margins make that harder. Many distributors earn a thin gross margin on high volume, so there isn't much room to absorb a slow-paying customer, a price increase or a large order that has to be stocked before it ships. Growth makes the squeeze tighter: a big new account can mean more inventory and more receivables at once, which is a cash problem before it becomes a profit.
Why distributors need capital quickly
- A new account. Stocking a new chain, contractor or restaurant group before their first order ships.
- A supplier opportunity. A volume buy, closeout or pre-price-increase purchase that's only available if you pay now.
- Seasonal stock. Lawn and garden before spring, heating supplies before winter, holiday goods in late summer. More on inventory funding.
- A new product line. Meeting a manufacturer's minimum opening order to become an authorized distributor.
- A customer paying late. Covering payroll and suppliers while a large receivable is past due.
Hypothetical example. A foodservice distributor averaging $400,000 a month in deposits lands a regional restaurant group that pays on net-30. Stocking for the account takes an extra $150,000 of inventory. The distributor takes $150,000 at a factor rate of 1.28, so the purchased amount is $192,000. On weekly payments over 40 weeks that's about $4,800 a week; daily over 200 business days, about $960 a day. Round illustrative numbers, not an offer.
Should you use an advance to take early-payment discounts?
Supplier terms like "2/10 net 30" offer a discount, here 2 percent, for paying within 10 days instead of 30. It's tempting to fund an advance just to capture those discounts. Do the math first: in most cases the cost of an advance is higher than a few points of discount, so funding an advance only to pay suppliers early usually loses money. It can make sense when the discount is unusually large, such as a closeout or a volume buy, or when paying early is the only way to get product you can sell at a strong margin.
Matching payments to customers on net terms
Distribution deposits tend to arrive as customer payments clustered around invoice due dates, plus card payments if you sell to smaller accounts. If your deposits come in a few large chunks each month, weekly payments, available in many cases, usually fit better than daily. Fund the inventory the new business needs rather than the full contract value, and size the payment so it still fits if your largest customer pays two weeks late. You can try amounts in the MCA calculator.
What an underwriter looks for in a distribution business
- Your A/R aging report. The single most important document for a business paid on terms: who owes you, how much and how old it is.
- Customer concentration. A distributor with one customer making up most of its receivables carries that customer's risk.
- Deposits. $50,000+ in average monthly deposits and at least 5 deposits a month over your last three months plus month-to-date.
- Existing obligations. Supplier credit, equipment payments and any advances already in place. Second position and onward is our strong suit.
- Balances. No more than 5 negative-balance days a month on average.
Distribution versus trucking and logistics
InstaFunders does not fund trucking and logistics businesses. A distributor that buys and resells products, and delivers them on its own trucks, is a distribution business. If most of your revenue comes from hauling or storing other companies' goods, that's trucking and logistics. If you're not sure where you fall, mention it when you apply; the full restricted list is on the requirements page.
Better tools for some distribution needs
- Steady, creditworthy receivables. Invoice factoring or an asset-based line built on your receivables and inventory usually costs less over time.
- Forklifts, racking or a delivery truck. Long-life assets are cheaper on equipment financing.
- Longer supplier terms. If an established supplier will extend terms for a bigger commitment, that's often the cheapest capital available.
Frequently asked questions
Can a wholesale business get a merchant cash advance if customers pay by check or ACH?
Yes. A merchant cash advance is based on your total business deposits, not just card sales. Customer checks and ACH payments count, and the underwriter reviews your A/R aging report alongside your statements.
Is invoice factoring better than an MCA for a distributor?
It can be when your cash is tied up in invoices to creditworthy customers. An MCA can fund needs that aren't tied to a specific invoice yet, like stocking for a new account, and doesn't require selling individual invoices.
Can I use a merchant cash advance to stock inventory for a new customer?
Yes, that's one of the most common distribution uses. Fund the inventory the account needs, and choose a payment you can carry until that customer's invoices are paid.
Does InstaFunders fund distributors that deliver with their own trucks?
A distributor that delivers its own products is a distribution business. Businesses whose revenue comes mainly from hauling or storing other companies' goods fall under trucking and logistics, which InstaFunders does not fund.
How much can a distributor get?
InstaFunders funds $10,000 to $2,500,000, depending on deposits, time in business, credit and existing advances. Larger deals are covered on the large funding page.