Introduction to wholesale business loans in India
Wholesalers/Traders act as a vital link between the manufacturers of goods/commodities and consumers. The product of wholesale loans aims to provide hassle-free finance to traders and to meet their business and financial needs at competitive interest rates. Any individual or a firm (partnership or proprietorship) engaged primarily in buying and selling of goods is eligible for this scheme which offers a solution to all the financial needs of the wholesalers/traders.
As a wholesale business owner, you’re constantly trying to fill orders, form new partnerships with retail companies, and in turn grow your operations. At times, it can be challenging to do this without having additional funds on hand, which is why your business could flourish by applying for wholesale business loans.
Why should you apply for a wholesale business loan in India?
One of the biggest advantages of taking on certain debt, aka loan, is you do not have to worry about cash mobility or liquidity. With that aspect of your mind, you can then concentrate on doing business which requires you to expand to different locations, make new relations or just concentrate on the supply chain management.
Stay ahead of the competition, grow your business, and have peace of mind by applying for wholesale business loans. Having the working capital your wholesale business needs to function will allow you to focus your energy on building customer relationships; which is so important in this industry. The below mentioned are a few reasons why one should opt for a wholesale business loan.
- Increase cash flow – Wholesale businesses can always benefit from having additional cash on hand. This can be utilized for many different things, whether it is filling large orders or having extra cash to use for spur of the moment costs.
- Filling orders – Having available inventory to fill orders is pivotal. Without it, your wholesale business cannot survive. Wholesale loans can be especially beneficial if your company would like to ensure it has enough inventories to fill orders. You’ll be able to keep your customers happy, and your business will thrive!
- Purchasing additional inventory – In addition to having inventory readily available to fill orders, it can also be useful to add additional offerings to your wholesale business’s stock. This can allow you to form additional partnerships with different types of retail businesses, and stand out against competitors.
- Hire additional employees – Having enough employees to stock orders and ensure your business is operating at the highest level possible is imperative. The wholesale industry requires exceptional customer service, so you’ll want to have enough staff members to accommodate your clients’ needs. Apply for wholesale lending, and you’ll be able to hire more employees to support your customers’ demands.
- Update technology – Wholesale businesses can improve their processes by investing in new technologies. Having mobile and digital ordering functions, where your customers can submit their orders online can help streamline transactions, and help your company fill orders faster. In addition, using state-of-the-art online customer service platforms can improve customer relations. There are many technology products that your business can take advantage of, so pursue wholesale lending and get ahead!
Types of wholesale business loans available in India
- Working Capital Loan – One of the most famous loans amongst the wholesale business in India is the working capital loan. Wholesales/traders being the middle man between the manufactures and customers are always in need of liquidity for their working capital due to the timing mismatch. A working capital loan is a great way to overcome seasonal shortfall cash, cash crunch, or irregular cash flow for suppliers or customers.
- Term Loan – The most obvious kind of loan is the term loan available for wholesalers in India. These are standard loans that are applied for extremely specific purposes that need to be overcome. One of the biggest reasons for applying for a term loan is for the expansion of business or to grow the business in a different location. Term loans are usually for longer periods of times due to the large capital required for the growth of the business.
- Invoice Financing – As a manufacturer/trader most of your business is on credit term basis. Due to this many times, there could be a time lag in the payments and the receivables of the goods. This could hamper the growth of the business. Invoice financing is letting a third party take over your invoices while they pay you the amount of the invoices up front. This could reduce the workload for collecting cash payments on time and also reduce the issue of liquidity.
- Equipment Financing – These types of loans are predominantly for manufacturing businesses. Types of equipment can be costly but can be crucial for the operation and expansion of a business. Most banks offer manufacturing equipment loans, but banks also have specialized product around construction equipment loan. IT and office equipment and healthcare equipment loans are also provided by banks.
Problems faced while applying for a wholesale business loan
Now that you have discovered it is best for your business to take on loan, there are some problems one might face while taking on a wholesale business loan. The three biggest obstacles preventing your distribution/wholesale business from getting a loan are:
- Not enough income: Traditional lending institutions want to see you earning at least Rs.5, 00,000 or more each month from your distribution/wholesale business operations.
- Poor credit: Having good credit and fulfilling your insurance requirements for your wholesale/distribution company will make a big difference when applying for a short-term business loan.
- Lack of business history: Without a business history of at least 6 months, your wholesale or distributor business will have trouble qualifying for a loan. You may have better luck looking at startup financing options.
How to combat the problems faced while taking on a wholesale business loan?
Now that you have read the problems faced by wholesalers while taking on you must be wondering how to tackle these problems. With the advancement of Fintech and NBFC’s coming into the picture, the minimum monthly revenue, credit score or lack of business history can be overcome. FlexiLoans is one such NBFC that uses Fintech to approve loans. Fintech reduces if not eliminates these issues faced by wholesalers and increases the process of loan approval. To know more about the different types of loans and the process for applying for a wholesale business loan through FlexiLoans, click here.