Commercial Distribution Finance
Access the commercial distribution finance your business needs
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Reference: 729876
What is commercial distribution finance?
CDF is a financial solution designed to support businesses in managing the purchase, distribution and sale of goods within a supply chain. Commercial distribution finance primarily provides funding to distributors, manufacturers, and retailers to ensure they maintain inventory levels and manage cash flow, to facilitate their business operations and accelerate growth.
Mill Wood Finance helps businesses to access asset finance solutions
Since 1999 we have been helping UK businesses to access commercial finance solutions including distribution finance.
The affordability and suitability for your business will vary greatly depending on a number of factors, including your credit history and business case for the loan application. Sifting through all of the various finance solutions on the market isn’t necessarily the best use of your time.
That’s where we come in.
We have an intimate understanding of the different options on the market, as well as having enviable connections within the commercial finance industry that enable us to access premier rates on behalf of our clients.
If you are seeking commericial distribution finance for your business, we are here to help.
How does Commercial Distribution Finance work?
- Supplier-Distributor Relationship: A distributor/retailer agrees to purchase inventory from a supplier or manufacturer.
- Finance Provider’s Role: The finance provider steps in to pay the supplier upfront, ensuring that the distributor can acquire the inventory.
- Repayment Terms: The distributor repays the finance provider over an agreed period, often aligning with the timing of sales to end users.
- Enhanced Cash Flow: This arrangement allows the distributor to focus on sales without tying up large sums of capital in inventory.
Key features and benefits of Commercial Distribution Finance
- Stock Level Maintenance: Helps businesses maintain optimal inventory levels without the requirement for large upfront investments.
- Flexible Repayment Terms: Payment schedules are often aligned with the distributor’s sales cycle, making it easier to manage cash flow.
- Vendor Relationships: Strengthens business relationships between suppliers and distributors by ensuring payments are made on time.
- Growth Support: Enables businesses to scale by accessing the inventory they need to meet any increase in demand.
- Improved Cash Flow: Frees up business working capital for other operational needs.
- Mitigates Risk: Reduces the financial strain of carrying large inventory volumes.
- Faster Growth: Enables businesses to seize market opportunities without liquidity constraints.
- Supplier Confidence: Builds trust with suppliers through timely payments facilitated by the finance provider.
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Which businesses benefit from Commercial Distribution Finance?
Distributors and Wholesalers
Access high-ticket products without a large capital outlay. Distributors and wholesalers gain access to a steady supply of products without depleting their working capital.
Retailers
Acquire required stock to maintain sales momentum. Retailers can procure goods to stock their shelves and meet customer demands without upfront payment.
Manufacturers
Get paid on time. Commercial distribution finance ensures timely payment for goods while maintaining strong distributor relationships.
Sectors
Commercial distribution finance is most common in industries like automotive, electronics, appliances, and other high-value products.
Example of Commercial Distribution Finance
XYZ Manufacturing Ltd is a medium-sized business that specialises in producing high-quality industrial equipment.
Their products are distributed by a wide network of distribution businesses across the UK. XYZ have experienced significant growth over the past trading year and have plans to expand their product line and distribution network further.
XYZ faces cash flow challenges due to the lengthy credit terms (60-90 days) that their distributors demand. To meet growing demand and to continue their business expansion, XYZ requires some additional working capital to manufacture and deliver the products whilst they wait to be paid by their distributors.
Without additional funding, XYZ would be unable to service these distributors and their expansion plans would be significantly impacted.
Key aspects of the commercial distribution finance facility for XYZ:
- Facility amount: £500,000.00
- Purpose of facility: To fund the production and shipment of products sold to their distributors under credit terms.
- Structure: The facility allowed XYZ to have a rolling line of credit linked to the company’s accounts receivable – so the repayments to the lender are based on XYZ’s income. Distributors receive long payment terms (60+ days) while XYZ receives immediate cash advances against their invoices, and thus continues to expand their manufacturing line and operations to continue their significant growth.
- Advance rate: Up to 85% of the value of approved invoices
- Repayment terms:
- Distributors pay directly to the lender the broker uses to provided the funds
- The remaining balance of the invoice (15%) is released to XYZ manufacturing upon full repayment by distributors, minus interest rates and fees.
- Collateral: The finance facility is secured against XYZ’s accounts receivable and inventory.
Benefits:
- Working capital improvement: XYZ accessed immediate cash upon shipment, meaning they could maintain production schedules and service each of their distributors.
- Distributor flexibility: Offering extended payment terms enhances distributor relations and loyalty and allows them to stock more inventory, keeping your distributor retention high while improving sales volumes.
- Growth enablement: The finance facility is scalable, therefore as sales grow, XYZ can draw more funds with the facility to maintain their rate of growth.
Helping you access finance products you won't find on the high street
Commercial distribution finance is a vital tool for businesses operating within supply chains, ensuring stable liquidity, fostering business growth, and maintaining strong supplier relationships. If you’d like more specific details or examples tailored to your industry, get in touch with Mill Wood.
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