Funding for Distributors: Working Capital Without Selling Your Receivables
Bottom line: Funding for distributors usually comes down to one gap. You pay suppliers in days and your customers pay you in weeks. Byzfunder fills that gap with a merchant cash advance (MCA) or ByzFlex revenue-based revolving capital, both underwritten on your bank deposit history. You keep your receivables and collect them yourself. We do not offer factoring or purchase-order financing, and this page explains exactly what that means so you can pick the right tool.
By the Byzfunder Editorial Team
Why distributors run short on cash even when sales are strong
A distributor makes money on the spread between what it pays for goods and what it charges for them. But the spread arrives late. You buy stock, store it, ship it, invoice it, and wait. Every one of those steps ties up cash before a dollar comes back.
Most small and mid-size distributors we see have the same pattern:
- Suppliers want payment in 15 to 30 days, sometimes on order.
- You extend net-30, net-60 or net-90 terms to your own customers, because your competitors do.
- Warehouse rent, forklifts, drivers, fuel and payroll are due every week no matter who has paid you.
That mismatch does not go away as you grow. It gets bigger. A distributor that doubles its sales usually doubles the money sitting in unpaid invoices. Growth consumes cash before it produces it. This is why funding for distributors is a standing need, not a rescue for a bad quarter.
The permanent receivables float
Here is a simple illustrative example. It is not a statistic or a promise of any result.
Say you invoice $200,000 a month on net-60 terms and your suppliers are paid within 20 days. At any moment, roughly two months of sales, about $400,000, is sitting in receivables. Your supplier bills for the stock behind those sales came due long ago. You have already funded that $400,000 out of your own pocket, and you will fund it again next month.
Now add the part owners underestimate. The float never closes. When you collect an old invoice, you immediately spend that cash restocking, which creates the next invoice and the next wait. You are not waiting for a single payment. You are carrying a rolling balance, and the size of that balance rises with every new customer you win.
Supplier terms, early-pay discounts and the cost of being slow
Suppliers reward distributors who pay fast. Volume rebates, early-pay discounts and better allocation on tight products all go to the buyer who can pay cash. A typical early-pay discount is offered as a small percentage off the invoice for paying inside a short window. Over a year of purchasing, that small percentage can be worth real money.
The trap is that a distributor stretched by its own receivables cannot take the discount. You pay on day 30 instead of day 10, give up the savings, and your margin shrinks quietly. Working capital that lets you pay early can earn back part of its cost through the discounts you stop missing. Run that math on your own purchasing before you assume any funding is too expensive. Your own supplier agreements and numbers decide it, not a rule of thumb.
Seasonal stocking and the order you cannot pre-buy
Few distributors sell evenly all year. Lawn and garden, HVAC, building supply, school and office goods, beverage and food service all swing with the calendar. Stocking for a peak means buying months before the money arrives.
Two situations come up again and again:
The seasonal build. You need to load the warehouse in the spring for a summer rush. The inventory bill lands in March. The revenue lands in July and August, then on net terms after that.
The big order you turn down. A customer asks for a pallet count you do not have on hand. You could win it if you could pre-buy the stock, but the cash is tied up in receivables. So the order goes to a competitor with deeper pockets, and that customer remembers who could not deliver.
Losing a large order for lack of cash is the most expensive form of the float, because it costs you the sale and the relationship at the same time.
Customer concentration: when one slow payer strains everything
Many distributors have one or two accounts that make up a big share of their sales. A large retailer, a regional chain or a contractor supplier can be 30 to 40 percent of revenue. That customer also tends to have the longest terms and the most leverage.
When that account pays late, nothing in your costs moves. Rent, payroll, fuel and your own supplier invoices still arrive on schedule. One slow payer can force you to stretch your own vendors, which puts your supply and your discounts at risk. The pain is out of proportion to the size of the delay.
Funding does not fix concentration. Winning more customers does. But working capital gives you room to absorb one late payment without a chain reaction, and room to keep building the rest of the book.
Factoring and purchase-order financing: what we do not offer
Distributors searching for funding often expect two specific products, so we will be direct.
Byzfunder does not offer factoring. Byzfunder does not offer purchase-order financing.
Both exist, and both can be a good fit for some distributors. They are offered by other providers. Here is how they differ from what Byzfunder does:
| Option | What it is | What it is based on | Who holds your receivables | Offered by Byzfunder? |
|---|---|---|---|---|
| Invoice factoring | Selling or assigning your unpaid invoices to a third party for cash now | The quality of your customers' invoices | The factor, who often collects from your customers | No |
| Purchase-order financing | Funding to pay a supplier for a specific confirmed customer order | The purchase order and the customer behind it | Varies by provider | No |
| Merchant cash advance (MCA) | A purchase of future receivables at a fixed factor rate agreed before funding | Your bank deposit history | You. You keep and collect your own receivables | Yes |
| ByzFlex | Revenue-based revolving capital you can request, repay and use again | Your bank deposit history | You. You keep and collect your own receivables | Yes |
If your main problem is a handful of large, creditworthy invoices and you are comfortable with a third party handling collections, factoring may suit you. If you need to fund one specific order from a supplier, purchase-order financing is built for that. Neither of those is what we do, and we would rather say so than let you spend a week on an application that goes nowhere.
What Byzfunder does instead
Byzfunder funds directly, from its own balance sheet. We look at the money moving through your business bank account, not at an invoice ledger or a purchase order.
Merchant cash advance (MCA). An MCA is a purchase of a portion of your future receivables at a fixed factor rate that is agreed before funding. It is not a loan and it does not carry an APR. Repayment is a fixed weekly debit, taken automatically, and the amount does not change with your sales. An MCA suits a one-time need: a seasonal inventory build, a bulk buy to lock in a supplier discount, or a truck you need this month.
ByzFlex. ByzFlex is revenue-based revolving capital. You request what you need, repay it, and use it again as your needs repeat, up to your approved amount. It suits the recurring shape of distribution, where the same float comes back every cycle. Repayment is a fixed weekly debit.
What you keep. In both cases, you own your receivables. Your customers keep paying you. You send the invoices, make the collection calls and manage the relationship. No one notifies your customers, and no one takes over your credit-and-collections function.
What you do not need. There is no invoice schedule to submit and no purchase order to pledge. That matters if your largest customers would not want a third party contacting their payables team.
Approval, amounts, factor rates and terms depend on the full file and are not guaranteed.
What Byzfunder looks at for a distributor
Our underwriting reads bank statements the way a distributor's cash actually behaves.
- Average monthly deposits. We look for roughly $20,000 or more per month. Most active distributors clear this comfortably.
- Deposit consistency across seasons. A distributor that deposits much more in its peak quarter than in its slow one is normal. We read the trend over several months, not a single week.
- Credit profile. FICO of 525 or higher for an MCA and 550 or higher for ByzFlex. Above the floor, credit is one factor among several.
- Time in business and file fit. Established operators with a steady bank history underwrite most smoothly.
To apply, have three months of business bank statements ready, plus basic business details such as entity, EIN and time in business. Some files need a recent tax return.
Frequently asked questions
Does Byzfunder offer factoring or purchase-order financing?
No. We do not offer either one. Byzfunder offers MCA, ByzFlex and Term Loan. If you specifically need invoice factoring or purchase-order financing, you will need to look to a provider that offers it.
Do I have to hand over my receivables or tell my customers?
No. With an MCA or ByzFlex you keep your receivables and you collect them yourself. Your customers keep dealing with you. We underwrite your bank deposit history, not your invoice ledger.
Is this good funding for distributors with long customer payment terms?
It can be. Long net-60 or net-90 terms create the float, and a fixed weekly debit means you know what leaves the account each week. Because repayment is fixed, plan around it. Make sure your weekly cash can carry the debit before you accept any offer.
How does Byzfunder qualify wholesale distributor funding applications?
We review bank deposits, with roughly $20,000 or more in average monthly deposits as a reference point, along with a FICO of 525 or higher for MCA or 550 or higher for ByzFlex, time in business and overall file fit. Seasonal swings are expected in distribution and are read in context.
Can I use the money to buy inventory?
Yes. Distributors commonly use funding for seasonal stock, bulk buys, warehouse costs, fleet repairs and payroll. You decide how to use it, within the terms of your agreement.
How fast can I get an answer?
Applying takes minutes. A clean file with bank statements ready moves fastest, but timing depends on the file and nothing is guaranteed.
Ready to talk about funding for your distribution business?
If the gap between paying suppliers and getting paid by customers is slowing you down, start an application at apply.byzfunder.com. We have funded $1.75B+ across 30,000+ businesses since 2019, and we will tell you straight whether we are the right fit.
ByzFunder NY LLC funds small businesses directly from its own balance sheet. Approval is based on deposit history, credit profile and file fit, and is not guaranteed for any applicant. Amounts, factor rates and terms vary by file. This content is educational and is not an offer of financing.