Distribution Factoring for Wholesale Distributors
Turn invoices owed by retailers and resellers into cash you can spend on the next purchase order. Approval comes the same day, new accounts close in 2–5 days, and you add no debt to your balance sheet.
- ✓Advance: 70%–90% of each delivered invoice.
- ✓Fee: 1%–3% per period, shown before you factor.
- ✓No minimum credit score; your retailers’ credit counts most.
Get an instant factoring quote
Answer a few questions about your invoices and see an estimated rate and advance range.
Answer a few questions about your invoices and see your estimated rate and advance range. No obligation.
By submitting, you agree that IFXI may share the information you provide with its lending partner so it can review your request, and that IFXI or its lending partner may contact you by email or phone about it. See our Privacy Policy.
Same day
Thanks. Your request is on its way to our lending partner, which reviews it and contacts you directly. Approval typically comes the same day.
Message a SpecialistExecutive Summary: Distribution Factoring
What it is: Distribution factoring is defined as invoice factoring that funds wholesale distributors’ invoices to retailers and other resellers. Wholesale distribution is the business of buying from manufacturers and reselling to retailers, often against retailer chargebacks and long payment terms.
The numbers: Advance: 70%–90% of each invoice · Fee: 1%–3% per period · Approval: same day; closing: 2–5 days · Volume: estimated $50,000 a month.
Key constraints: Invoices must cover delivered goods owed by businesses with acceptable credit. Consignment and guaranteed-sale shipments do not qualify, and a heavy deduction history can lower your advance within the range.
The Fast Facts on Distribution Factoring
What is distribution factoring?
The short answer is that you sell invoices owed by retailers and resellers for an advance of 70%–90%, and the retailer pays the lending partner on its normal terms.
Do retailer chargebacks affect factoring?
The short answer is yes: deductions reduce what the retailer pays, so the lending partner reviews your chargeback history when it sets your advance.
Can I fund inventory before I invoice?
The short answer is that factoring starts after delivery. For goods you have not bought yet, see purchase order financing.
Cash flow gaps distribution factoring can close
Retailers pay on net-60
Big-box and regional chains pay in 60 days or more while your supplier wants payment on delivery.
Seasonal orders outrun cash
A holiday or back-to-school order needs inventory months before the retailer pays.
Chargebacks shrink each remittance
Compliance fines, shortage claims and promotional deductions cut the check you expected.
How distribution factoring works for wholesale distributors
The documents the lending partner reads
Your invoice, the retailer’s purchase order and a signed bill of lading or delivery receipt show the goods arrived as ordered.
Who pays whom: distribution factoring
You receive the advance. The retailer pays the lending partner under a Notice of Assignment, and you receive the reserve minus the fee.
Fits and limits: distribution factoring
Distributors with B2B retail and reseller customers fit best; newer firms can review startup invoice factoring. One dominant retailer? Compare recourse and non-recourse factoring.
How to get funded with distribution factoring in 3 steps
Request your quote
Enter your volume, invoice size and terms in the quote form. An IFXI specialist reviews your request and forwards it the same day.
Approve & fund
The lending partner verifies your invoices and checks your customers’ credit. Approval comes the same day, your account closes in 2–5 days, and you receive 70%–90%.
Reserve rebate
When your customer pays, the lending partner releases the reserve minus the 1%–3% fee.
Funding timeline for distribution factoring
| Stage | Typical Timeframe |
|---|---|
| Quote request submitted | Day 0 |
| Approval | Same day on a complete application |
| Account setup and UCC-1 filing | 2–5 days to close |
| Funding on an active account | Same day or within 24 hours |
| Reserve released | After your customer’s payment clears, minus the fee |
Timeline notes for distribution factoring
- ✓Same-day funding applies once your account is active.
- ✓You see the 1%–3% fee range before you factor.
- ✓The lending partner files a UCC-1 on your receivables.
Who qualifies for distribution factoring and what you need
| Requirement | What qualifies | Notes |
|---|---|---|
| Invoice type | B2B invoices for delivered goods or completed work | Consumer invoices do not qualify. |
| Customer credit | Commercial or government customers with acceptable credit | The lending partner checks each customer. |
| Invoice age | Current invoices | Invoices past due more than 90 days do not qualify. |
| Existing liens | No UCC lien from another lender on your receivables | A tax lien gets a case-by-case review and does not rule you out. |
| Volume | Estimated $50,000 a month minimum | No maximum. |
| Your credit | No minimum credit score | The application authorizes business and personal credit reports. |
Quote documents for distribution factoring
- ✓Accounts receivable aging report.
- ✓Sample invoices with proof of delivery or completion.
- ✓Customer list with payment terms.
- ✓Business formation documents, owner ID and a voided check.
What delays funding: missing proof of delivery, a customer dispute, and an existing lien on your receivables.
Transparent Costs for Distribution Factoring
| What to Expect in Costs | What Affects the Costs |
|---|---|
| Advance rate: 70%–90% of invoice face value. Factoring fee: 1%–3% per period. Reserve: released minus the fee when your customer pays. | Customer credit: stronger customers earn better terms. Invoice terms: longer terms add periods. Recourse: non-recourse prices toward the high end. See pricing. |
Worked example: a $50,000 invoice
| Line | Amount |
|---|---|
| Invoice face value | $50,000 |
| Advance at 85% | $42,500 |
| Reserve held (15%) | $7,500 |
| Factoring fee at 2% | $1,000 |
| Reserve released after your customer pays | $6,500 |
| You receive in all | $49,000 |
Illustrative example inside the published ranges. Your quote sets your actual advance rate and fee.
Distribution Factoring vs. Bank Line of Credit vs. Merchant Cash Advance (MCA)
| Feature | Distribution Factoring | Bank Line of Credit | Merchant Cash Advance (MCA) |
|---|---|---|---|
| Typical Approval Speed | Same day | Estimated 2–8 weeks | 1–3 days |
| Min. Credit Score Requirement | None: approval rests on your customers | Estimated 650–700+ (owner personal) | Estimated 500+ (owner personal) |
| Maximum Advance Rate | 70%–90% of invoice face value | Variable (% of collateral or assets) | Estimated 70%–80% of monthly revenue |
| Debt Added to Balance Sheet? | No: you sell a receivable | Yes: revolving debt liability | Yes: recorded as a liability |
| Hidden Fees / Covenants | 1%–3% per period, shown before you factor | Origination, maintenance, annual review, covenants | Factor rates, daily ACH debits, prepayment penalties (Variable/Estimated) |
| Best For | B2B businesses waiting on net-30 to net-90 invoices | Established companies with strong financials and collateral | Businesses with card sales and no invoices |
When distribution factoring is not the right fit
- ✗You sell on consignment. Consignment and guaranteed-sale shipments do not qualify.
- ✗It costs more than a bank line on an annual basis. A 2% fee on a 30-day invoice works out to about 24% a year (2% × 12 periods).
- ✗Your customers see the arrangement. They pay the lending partner under a Notice of Assignment.
- ✗A UCC-1 goes on file. Article 9 of the UCC covers sales of accounts, so the filing can block other financing secured by your receivables.
How IFXI handles your request for distribution factoring
No long-term contracts
The lending partner’s agreement has no long-term contract.
Transparent fees
You see the 1%–3% fee range before you factor.
An IFXI specialist on your request
An IFXI specialist reviews your quote request and forwards it the same day.
Funding scenarios for distribution factoring
Distributor restocks for the holidays
- Funding Amount
- $120,000
- Industry
- Housewares distribution
- Customer Type
- Regional retail chain
- Funding Type
- Invoice factoring
- Invoice Terms
- Net-60
- Advance Rate
- 85%
A $120,000 holiday order shipped, and the chain paid on net-60.
The SolutionThe distributor factored the delivered invoices once its account was active.
Result$102,000 advanced.
Food distributor with deductions
- Funding Amount
- $45,000
- Industry
- Specialty food distribution
- Customer Type
- Grocery chains
- Funding Type
- Invoice factoring
- Invoice Terms
- Net-30
- Advance Rate
- 80%
Shortage claims and promotional deductions cut each remittance.
The SolutionThe lending partner set the advance at 80% after reviewing the deduction history.
Result$36,000 advanced.
Building supply wholesaler pays its mill
- Funding Amount
- $70,000
- Industry
- Building materials distribution
- Customer Type
- Lumberyards and dealers
- Funding Type
- Invoice factoring
- Invoice Terms
- Net-45
- Advance Rate
- 90%
The mill wanted payment before the dealers paid on net-45.
The SolutionThe wholesaler factored its dealer invoices to pay the mill on time.
Result$63,000 advanced.
Frequently asked questions about distribution factoring
What is distribution factoring?
Distribution factoring is defined as invoice factoring that funds wholesale distributors’ invoices to retailers and other resellers. You receive 70% to 90% of each delivered invoice, and the retailer pays the lending partner on its normal terms.
How fast can I get funded with distribution factoring?
The short answer for distribution factoring is same-day approval on a complete application and 2–5 days to close a new account. Once your account is active, invoices you submit fund the same day or within 24 hours.
Who qualifies for distribution factoring?
The short answer is a distributor with B2B invoices for completed work, customers with acceptable credit and an estimated $50,000 in monthly volume. There is no minimum credit score, and a tax lien gets a case-by-case review.
How do chargebacks change my factoring advance?
The short answer is that a heavy chargeback history can lower your advance within the 70% to 90% range, because deductions reduce what the retailer pays. Disputed deductions stay with you to resolve.
Can a new distributor with limited history factor invoices?
Yes, you can factor with limited history when your customers have acceptable credit and the goods are delivered. The lending partner looks first at the retailers that owe the invoices; see accounts receivable financing for the broader category.
Which distributor invoices do not qualify?
The short answer is consignment and guaranteed-sale shipments, invoices to consumers, disputed invoices and invoices past due more than 90 days.
How much does factoring a $50,000 invoice cost?
The short answer is that factoring a $50,000 invoice costs $1,000 at a 2% fee. At an 85% advance you receive $42,500 up front and $6,500 from the reserve, $49,000 in all. At 1% to 3% the fee runs $500 to $1,500.
Do my customers know I use factoring?
The short answer is yes: your customers pay the lending partner under a Notice of Assignment. Under UCC §9-406, a customer with the notice settles the invoice only by paying as the notice directs.
Sources
- UCC §9-406, discharge of account debtor after notice of assignment (Cornell Law School, Legal Information Institute)
- UCC §9-109, scope of Article 9, including sales of accounts (Cornell Law School, Legal Information Institute)
General information about distribution factoring. Rates, advance amounts and approval come from IFXI’s lending partner after its review and can change.
Ready to unlock your cash flow?
Fill out the instant quote form at the top of the page to get started. There is no obligation and no long-term contract.