Alternative Financing for Wholesale Produce Distributors
One avenue is equipment financing/leasing. Equipment lessors help small and medium-sized businesses obtain equipment financing and leasing when unavailable through their local community bank.
A wholesale produce distributor’s goal is to find a leasing company that can help with all of their financing needs. Some financiers look at companies with good credit, while some look at companies with bad credit. Some financiers look strictly at companies with high revenue (10 million or more). Other financiers focus on small-ticket transactions with equipment costs below $100,000.
Financiers can finance equipment costing as low as 1000.00 and up to 1 million. Businesses should look for competitive lease rates and shop for equipment lines of credit, sale-leasebacks & credit application programs. Take the opportunity to get a lease quote the next time you’re in the market.
Merchant Cash Advance
It is not typical for wholesale distributors of produce to accept debit or credit from their merchants even though it is an option. However, their merchants need money to buy the product. Merchants can make merchant cash advances to buy their produce, increasing their sales.
Factoring/Accounts Receivable Financing & Purchase Order Financing
One thing is sure when it comes to factoring or purchase order financing for wholesale distributors of produce: The simpler the transaction is, the better because PACA comes into play. Each deal is looked at on a case-by-case basis.
Is PACA a Problem? Answer: The process has to be unraveled by the grower.
Factors and P.O. financers do not lend on inventory. Let’s assume that a produce distributor is selling to several local supermarkets. The accounts receivable usually turn very quickly because produce is a perishable item. However, it depends on where the produce distributor is sourcing. If the sourcing is done with a more prominent distributor, there probably won’t be an issue with accounts receivable and purchase order financing. However, if the sourcing is done directly through the growers, the funding must be done more carefully.
An even better scenario is when a value-add is involved. Example: Somebody is buying green, red, and yellow bell peppers from various growers. They’re packaging these items up and then selling them as packaged items. Sometimes, that value-added process of packaging, bulking, and then selling it will be enough for the factor or P.O. financer to look at favorably. The distributor has provided enough value-add or altered the product enough that PACA does not necessarily apply My Latest News.
Another example might be a produce distributor taking the product, cutting it up, packaging it, and distributing it. There could be potential here because the distributor could be selling the product to supermarket chains – so, in other words, the debtors could very well be outstanding. How they source the product will have an impact, and what they do with it after they source it will affect it. This is the part that the factor or P.O. financer will never know until they look at the deal, and this is why individual cases are touch and go.
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