Alternative Financing for Wholesale Produce Distributors
One avenue is equipment financing/leasing. Equipment lessors help small and medium-size businesses obtain equipment financing and equipment leasing when it is not available to them through their local community bank.
The goal for a distributor of wholesale produce 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 very 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 your produce, which will increase your 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 to the grower.
Factors and P.O. financers do not lend on inventory. Let’s assume that a distributor of produce is selling to a couple of local supermarkets. The accounts receivable usually turns 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 a variety of growers. They’re packaging these items up and then selling them as packaged items. Sometimes that value-added process of packaging it, bulking it, 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 where PACA does not necessarily apply My Latest News.
Another example might be a distributor of produce taking the product and cutting it up and then packaging it, and then 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 the product after they source it will affect. 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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