Wholesale and Distribution Finance
Running a successful wholesale and distribution business can mean facing unique cash flow and timing challenges, any one of which can make it difficult to take on new orders or even to keep the business up and running. At Gibraltar, we’ve been helping companies in distribution and wholesale survive difficult transitions and grow successfully.
We specialize in providing greater security and flexibility for wholesalers and distributors with limited operating and credit histories, one or more large contracts that create revenue fluctuations, or who need to make investments to increase stability and growth. We’re able to do this because we’ve worked hard to understand the challenges wholesalers and distributors face and what it takes to conquer these challenges.
Challenges in Wholesale and Distribution
Some of the challenges wholesalers and distributors face that can be helped by Gibraltar’s asset-based lending include:
- Gearing up quickly for new large orders or contracts
- Need to upgrade equipment and technology systems to keep up with demand and security issues
- Coming back from economic and market slowdowns
- Gap times between order and shipment and payment for goods
- Demands from retailers for faster deliveries
- Vulnerability to changing prices of goods and/or fuel
- Taking on established competitors
- Stabilizing volatile revenue
There are two reasons why it is important for your asset-based lender to understand not only the wholesale distribution process in general, but also the particular industry in which you operate.
Understanding an industry helps a lender analyze how your issues relate to those of the industry in general, and what potential expenses and challenges you are likely to face. An informed lender is less likely to get impatient if the road gets a little bumpy.
Industry knowledge also helps a lender put an accurate value on your assets; lenders who are unfamiliar with an industry may undervalue assets like special equipment or even accounts receivable in an industry that traditionally offers longer payment terms.
Successes Can Challenge Building Material Distributors
Any circumstance that causes a distributor to have to stretch its payables can quickly impact vendor relationships and company profitability. Left unaddressed for long, this can become a problem for a company, especially in a traditional banking relationship.
Sales growth can also be a challenge for a distributor, as well, if it doesn’t have the credit it needs to fulfill the demand. Millard Lumber, an Omaha-based top value-added distributor of lumber and other building products, experienced strong sales growth, creating a need for expanded credit. At the request of a boutique investment bank engaged by Millard, Gibraltar assisted in the refinancing with a $12 million revolving credit facility. The custom structure included increased advance rates on accounts receivable and inventory. Millard was so successful in its usage of this financing, that the company quickly experienced tremendous further sales growth and needed additional working capital. Gibraltar responded by expanding their ABL credit to $16 million.
Food Products Distributors Need Liquidity to Gear Up
It’s hard for any distributor to grow without planning for and investing in the future. Dari Farm’s Ice Cream, headquartered in Tolland, Connecticut, is a full-service grocery and food service product distributor with a broad line of products ranging from ice cream and beverages to snack foods and produce. The company was backed by private equity firm, Diversis Capital, which had worked successfully with Gibraltar Business Capital before. Diversis returned to Gibraltar to provide additional liquidity to Dari Farms to support implementation of growth and efficiency plans intended to take the company to the next level of success.
Gibraltar was able to see what we saw in the acquisition. They were able to understand the business and our plans for growth.
– Devin Scott, Diversis Capital
Acquiring Company – Dari Farms
Mis-Timing Infrastructure Investments Can Hurt Consumer Products Companies
Anticipating growth is crucial to success, but making a mistake in timing investments in infrastructure can leave companies with cash flow problems while waiting for that growth. An 11-year-old Home Furnishings Company, based in New York City, ran into this problem. It was also struggling to improve inventory costing controls while trying to restructure its infrastructure-related debt. The company markets and distributes home fashions such as bedding, towels, shower curtains and pillows to several off-price and full-price big-box retail chains. Businesses can be very good at their primary work and yet fall into problems when it comes to managing growth. Brought in by the company’s turnaround consultant, Gibraltar saw the improvement processes in a positive light, as setting the stage for strong future growth. Gibraltar stepped in with asset-based financing that allowed the home fashion producer to gain more time to complete improvements. Gibraltar used accounts receivable and inventory to also provide additional working capital to create a bridge to the future.
A Solution for Wholesale and Distribution Challenges — Asset-Based Lending
As a finance tool, asset-based lending facilities can be an excellent solution for situations not suited to the limitations of a traditional lender. Asset-based lending allows you to borrow against the value of the receivables, inventory and equipment assets of your wholesale or distribution business, allowing some flexibility for fluctuations in financial ratios or performance. If you’re in a transitional phase of growth, your needs exceed what a traditional lender will provide, or you want more flexible terms, Gibraltar may have your answer.
Wholesale and Distribution Finance FAQs
Wholesale and distribution finance covers credit solutions that can enable your company to stabilize working capital, make strategic investments, purchase equipment or refinance existing loans.
Asset-based lending is a type of wholesale and distribution finance that allows you to borrow the money you need using your company assets — accounts receivable, inventory, equipment — as collateral.
We are more flexible in the factors we can take into account in structuring your loan. We have a lot of experience with wholesalers and distributors and work hard to understand your company, so that we can provide you with maximum liquidity and flexibility.
An asset-based line of credit can provide you with the money you need, when you need it, to keep the bills paid or invest in strategic initiatives such as a facilities expansion. Since the cost of growth is usually difficult to determine in advance, a revolving line of credit allows you to borrow and pay interest on only what you spend.
Look for ways to increase and diversify your suppliers and your market and find logistical cost savings, some of which may also be temporary or seasonal. In the meantime, an asset-based line of credit can help you survive fluctuations and stay on course toward stability.
Our Gibraltar team closes on our facilities quickly, in as little as 30 days. Plus, once you have an approved line of credit in place, the unused balance is always available to you for immediate withdrawal as future needs arise.
Asset-Based Lending Resources
Whether you are a CFO, company owner, or financial sponsor, we have resourceful materials that can help you better understand our product and industry. Download one of our product or industry guides today.
Gibraltar Business Capital and Financial Sponsors — Partnerships That Work
A Guide to Achieving the Benefits of Asset-Based Lending
A CFO’s Quick Guide to Asset-Based Lending
What CFOs Should Know About Asset-Based Lending