Wholesale businesses (NAICS 4231–4239) finance primarily through inventory financing (UCC-1 secured lines), accounts receivable lines of credit, and factoring on commercial receivables. The cash conversion cycle — inventory purchase to AR collection — is the central underwriting variable. International wholesalers can access EXIM Bank programs for export-related financing.
Wholesale businesses hold large inventory positions that are financed through UCC-1 secured revolving lines. The lender files a UCC-1 financing statement against the inventory, creating a security interest. Advance rates vary by inventory type: finished goods (70–80% of liquidation value), raw materials (50–60%), perishables or highly specialized inventory (lower). The line revolves as inventory is purchased and sold — borrowers draw to buy inventory and repay as receivables are collected. Lenders require quarterly inventory audits and may conduct field exams. 7(a) lines of credit can be used for inventory: https://www.sba.gov/funding-programs/loans/7a-loans.
Once inventory becomes a receivable (product shipped, invoice issued), the lender advances against AR rather than inventory. A/R advance rates are typically 70–85% of eligible receivables (invoices under 90 days, domestic, creditworthy obligors). Ineligible AR is excluded — invoices with contra-party disputes, government entities (slower pay), or foreign obligors without EXIM coverage. The combined inventory + AR borrowing base is the maximum drawn at any time. This structure is often called an asset-based lending (ABL) facility.
Factoring is the sale (not pledge) of receivables to a factor at a discount. Wholesale businesses with strong commercial customers (retail chains, distributors) but slow internal collections use factoring to accelerate cash. Advance rates: 80–90% of invoice face value upfront, balance (minus factor fee of 1–3%) on collection. Recourse vs. non-recourse factoring differs on who bears the credit risk of the obligor defaulting. Factoring is faster to access than a bank ABL line but more expensive in steady-state operation.
Wholesale businesses with export sales can access Export-Import Bank of the United States programs — specifically the Export Working Capital Program (EWCP) and Export Credit Insurance. EWCP provides SBA-like guarantees on revolving lines up to $5 million for export-related working capital (inventory + AR tied to export orders). This is a critical program for wholesalers sourcing domestically and selling internationally, or serving as export agents. Program details at https://www.exim.gov/.
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