Manufacturing and wholesale funding: stock, machinery and long payment terms

Making or moving physical goods ties up cash in a way service businesses rarely experience. A manufacturer buys raw materials, pays staff to turn them into product, stores the product, ships it and then waits thirty, sixty or ninety days to be paid. A wholesaler buys in bulk, often from overseas, and sells on terms to retailers. In both cases, the business can be growing strongly and still feel permanently short of cash.

The cash cycle in goods businesses

The key measure is how many days pass between paying for inputs and getting paid by customers. Add the days stock sits on the shelf to the days customers take to pay, then subtract the days your suppliers give you. The result is the number of days your own money funds the business. The longer that cycle and the faster you grow, the more working capital you need.

Big orders make this sharper. A new national retail customer can double your sales, but you’ll need to buy materials and produce stock long before the first invoice is paid.

Funding options that fit

Line of credit. A flexible limit that rises and falls with your stock and debtor cycle. See business lines of credit.

Invoice finance. Advances against invoices issued to creditworthy customers, often the most efficient way to fund growth for businesses selling on terms. See invoice finance.

Trade finance. Pays overseas or local suppliers upfront, with repayment once goods are sold. Common in wholesale and import-heavy businesses.

Equipment finance. For machinery, forklifts, vehicles and production lines, secured by the asset and usually registered on the PPSR.

Short-term working capital loans. For one-off needs such as a large order or a seasonal stock build. See short-term working capital loans.

Property-secured loans. For a new factory, warehouse expansion or larger facilities, where property security allows longer terms and higher amounts.

What lenders assess

Lenders will want to understand your margins, your largest customers and how reliably they pay, your stock turnover, and any concentration risk if one customer makes up a big share of sales. They’ll look at bank statements and financials, an aged debtors list and sometimes stock reports. Security already registered on the PPSR, such as a general security agreement held by another lender, will also be checked, because it can affect what new lenders can offer.

Practical tips for goods businesses

• Negotiate supplier terms. Longer terms from suppliers reduce the cash you need to fund.
• Watch slow-moving stock. Old stock ties up cash and reduces what lenders will advance.
• Credit-check new customers. A large order from a slow payer can do more harm than good.
• Keep records clean. Accurate stock and debtor reports make lending faster and easier.

Planning for a growth step

Before you accept a big new order or contract, model the cash flow month by month: when you’ll buy materials, when you’ll pay staff, when you’ll ship and when you’ll be paid. That model tells you exactly how much funding you need and for how long, and it’s the same picture a lender will want to see.

Seasonal stock builds

Many wholesalers stock up months ahead of their peak season, whether that’s Christmas, summer or the end of the financial year. That build can be the single biggest cash drain of the year. A facility sized for the peak and repaid as the stock sells is usually cheaper and safer than stretching supplier accounts or delaying tax payments. Lenders are comfortable with seasonal patterns when past years show stock clearing on schedule, so keep a record of how each season played out.

Customer concentration and how to manage it

Many manufacturers and wholesalers rely heavily on a small number of customers, sometimes one large retailer or distributor that takes most of the output. Lenders understand this is common, but they will ask what would happen if that customer reduced orders or paid late. A written supply agreement, a long trading relationship and evidence of on-time payment all help. So does a plan to widen the customer base over time. If one customer makes up a large share of your sales, mention it at the start and explain the relationship; it’s far better than having the assessor spot it in your debtors list and wonder.

Fund your next production run

Tell us about your products, customers and what you need through our quick enquiry form. There’s no credit check to enquire, your file stays with one team, and a real person will tell you which mix of facilities fits your cash cycle. Tell us what you make or sell.