Do You Have the Working Capital for Christmas Seasonal Sales Spikes?

If you run a wholesale distribution company, functioning as the bridge between local retailers and overseas manufacturers, Christmas seasonal sales spikes represent a huge chunk of your business for the year. And that means you really need to prepare adequately. You have to make sure that you optimize your supply chains and distribution networks so that you can quickly deliver high volumes of products to needy retailers eager to take advantage of the consumer desire to spend for gifts.

Visit Neebo Capital to get working capital to meet holiday orders.
Visit Neebo Capital to get working capital to meet holiday orders.

If you have the foresight, then you should have prepared for this eventuality long before the Christmas season even started. But even the most prepared may not have enough working capital to ensure that they have the products ready to deliver for the retailers. It’s not uncommon for successful wholesalers to get large volume orders for which they may not have reserve cash to use.

Fortunately, there are options which you can consider so that you actually have the money needed to buy supplies:

  1. You can arrange for a loan or a line of credit from a bank. A line of credit is probably your best bet for this scenario. With it, you can draw only enough money for your needs, so that you don’t pay interest on money you don’t need to spend. It’s very easy to ask for a loan for a specific amount of money that turns out to be either insufficient or too much.

However, many wholesale companies have long realized that banks are unreliable partners when it comes to emergency funding. You may or may not get your loan, as the requirements can be pretty strict regarding your credit and your collateral. And you may have to endure a protracted loan application process in the bargain.

  1. You can arrange for invoice factoring to bolster your cash reserves. When you deal with retail companies, you have to accept the fact that they do not pay you cash on delivery of the products they ask for. They’ll make you wait for at least 30 days. Sometimes the wait can even be as long as 90 days. This means that you can’t access those funds as a way to buy the supplies for your retailers.

But you can access those funds with invoiced factoring. The factor gives you an advance on the value of the accounts receivables, and this can reach up to 80% or even 90% of the value of the invoice. You get the rest later when the retailer finally pays for the previous products you’ve shipped them. But with this advance, you get enough money to buy supplies if you receive a large order and your current cash reserves are inadequate to cover the volume of the order. Invoice factoring has a higher approval rate, your credit doesn’t matter, and the application process is much faster.

  1. You can use the purchase order to obtain additional financing. Basically, the financing company can provide half (or even more) of the value of the purchase order. With this method, you can then bolster your cash reserves to meet the demands of Christmas seasonal sales spikes.

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Chris Lanchech

Hi everyone, my name is Chris and I am a junior analyst at Neebo Capital and an inspiring blogger. We enjoy speaking with business owners and entrepreneurs who come to Neebo Capital looking for cash flow solutions. Give us a call toll free at 1-888-382-3766 or Visit us online at www.neebocapital.com

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