Distribution · Business lines of credit
Business lines of credit for distributors
Distributors carry inventory before it sells and wait on receivables after it ships. A line of credit offers a revolving cushion for that inventory-to-cash cycle.
What to know
What distributors should know about lines of credit.
Early-pay discounts can pay for the line.
If suppliers offer a discount for paying early, drawing on a line to take it can sometimes offset the cost of borrowing. Run the numbers on your terms.
Seasonal inventory builds.
Stocking up before peak season uses cash months before sales, which a revolving line can cover and be repaid as inventory sells.
Lenders watch inventory and receivables.
Asset-based lines may be sized on inventory and receivables, while unsecured lines rely more on revenue and credit.
Keep the limit and the use aligned.
Using a revolving line for long-term assets can strain cash, so reserve it for working-capital needs and use term financing for larger purchases.
FAQ
Common questions from distributors.
How much of a line of credit can a distributor get?
Limits depend on revenue, credit, time in business and in some cases inventory and receivables. Each lender sets its own limits and may review them periodically.
Is a line of credit better than a term loan for inventory?
For recurring or seasonal inventory needs, a revolving line is often more flexible because you pay interest only on what you use. A term loan can suit a one-time purchase.
Do lines of credit have fees besides interest?
They can. Common fees include origination, draw, maintenance or unused-line fees, so review the full fee schedule before accepting.
Is Truidian a lender or factoring company?
No. Truidian is a business solutions company. It helps businesses identify and connect with participating third-party providers, who make every approval, pricing and terms decision.
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Truidian is a business solutions company, not a lender, factoring company or payment processor. Financing and services are offered by participating third-party providers and are subject to their approval and terms. Approval, funding, rates and terms are not guaranteed.