Start with the wholesaler. Supplier terms, such as 30 days to pay, cost nothing if the bill is paid on time and are the first credit a store or shop has. A loan or line makes sense when the order is larger than the supplier will carry, the stock sells slower than the terms allow, or an early-payment discount is worth more than the interest.
An article from Eaglepark Business Funding in Henderson, North Carolina on paying wholesalers through supplier terms, vendor credit or a loan, with Vance County, NC wholesale and retail counts and an invented discount example.
Working Capital for Inventory When Supplier Terms Run Short
Supplier terms fit stock that sells within the terms. When the stock takes longer, a gap opens: the bill is due before the goods have turned into cash. That gap is what working capital or inventory financing covers.
A store can see the gap in its own records: compare the days its supplier gives with the days its stock usually sits before selling. If the supplier gives 30 days and the stock sells in 45, the store carries 15 days of inventory on its own money or on borrowed money. Working capital financing and inventory financing both fit that gap.
Vendor Financing in Real Estate Versus Vendor Credit From a Wholesaler
The phrase "vendor financing" means different things in different places. In real estate, it usually means seller financing: the seller of a property lends part of the price to the buyer, who pays the seller over time. In a business purchase, a seller note works the same way.
Vendor credit from a wholesaler is different: it is the trade account itself, the days the supplier allows before payment is due. Some equipment vendors also arrange financing for what they sell, often through a finance company. Each is a different kind of credit, with its own terms to read.
How Does Inventory Financing Work Next to Net-30 Supplier Terms?
Inventory financing can sit alongside supplier terms rather than replace them. Illustration only, invented figures: a wholesaler offers 2% off a $15,000 order paid within 10 days, otherwise the full amount is due in 30 days ("2/10, net 30"). Paying early saves $300. Giving up that discount to keep the money 20 more days works out to about 37.2% a year (our arithmetic: 2/98 x 365/20).
If the store borrows the discounted amount for those 20 days on a line at an annual rate of 12%, the interest is about $97 (our arithmetic), less than the $300 discount. In this invented case, borrowing to take the discount comes out ahead; fees on the line, if any, would narrow the gap. A business line of credit suits this kind of short, repeating draw.
Questions a Henderson, NC Owner Asks a Wholesaler Before Asking a Lender
- How many days do I have to pay, and does that change for larger orders?
- Is there a discount for paying early, and how early?
- Is there a credit limit on my account, and can it be raised for a seasonal order?
- What happens if a payment is late: fees, a hold on the account, or both?
- Can a large order be split into deliveries, with each billed on its own terms?
The answers set the size of any request. A supplier willing to stretch terms for a large order may remove the need for financing; one with a tight limit may make it necessary.
Wholesale and Retail Counts in Vance County, NC
County Business Patterns counted 26 wholesale trade employers in Vance County, NC in 2023, with 631 paid employees and $36.6 million in annual payroll, and 173 retail employers with 2,081 paid employees. Restaurants and other eating places, another trade that buys from wholesalers every week, numbered 63.
Business loans for retail and restaurant loans cover stock and food orders for each trade, and the Henderson, NC page has the ZIP 27536 figures.
Keeping Supplier Credit Healthy While Borrowing
Supplier terms are themselves credit, and they depend on the store paying on time. A store that borrows to pay suppliers promptly can strengthen that relationship; a store that lets supplier bills slide while it waits for financing can lose its terms. Partners reviewing a request may notice supplier payments in the bank statements, so steady, on-time payments help both sides.
When the supplier's terms are not enough, call (252) 318-9633 or send the online form with the order, the terms and how soon the stock sells.
A Worked Look at a Large Seasonal Order
Illustration only, invented figures: a store places a $30,000 order for a busy stretch. The supplier gives 30 days, but the stock usually sells over about 75 days. If the store pays the supplier on day 30 with a draw on a line at an annual rate of 12%, and pays the line down evenly as the stock sells over the next 45 days, the average balance is about $15,000 for those 45 days, and the interest is about $222 (our arithmetic).
Without the line, the store would need the full amount in cash on day 30, or would pay the supplier late and risk its terms. With an inventory loan instead, it would carry the whole amount for the full loan term. Matching the draw to the selling period keeps the cost down to the days the money is actually needed.
By Eaglepark Business Funding · Updated
