A Wholesaler’s Guide to Smartphone Financing for Bulk Phones

What Is Smartphone Financing and How Can It Benefit Resellers?

Smartphone financing refers to financial solutions that help wholesalers and resellers secure the funds needed to purchase inventory. These options can include loans, credit lines, or programs that allow access to funds tied up in unpaid invoices. By using financing, resellers can increase purchasing power, manage cash flow more effectively, and scale operations without the upfront costs. This flexibility helps businesses meet demand, grow their product offerings, and improve overall financial stability.

Financing Your Mobile Wholesale Business: Understanding Your Options

Wholesalers have access to various bulk phone financing options that are essential for business growth. Choosing the right option can significantly impact your ability to scale and take your business to the next level.

Net Terms

Net terms are typically specified by a fixed interval of time for the payback period of an invoice, such as 30 days (Net 30) or 60 days (Net 60). In a Net 30 agreement (one of the most common forms of net terms), the buyer would be responsible for paying for their order 30 days after receiving the invoice.

For sellers such as smartphone wholesalers, offering net terms can be a useful purchase incentive that draws smaller resellers who would be reluctant to pay up front for large orders. By deferring the cost of the order by a month, the reseller may be able to sell the phones before payment is due. The reseller’s sales pay for their inventory cost.

Net terms allow small businesses to make inventory purchases that would otherwise strain their cash flow. Resellers may prefer to do business with wholesalers who offer generous net terms, such as Net 30, Net 60, or Net 90.

All the same advantages apply to wholesalers who would like to secure net terms on their own purchases from distributors. When a wholesaler purchases inventory on a Net 60 agreement with a distributor, they may be able to sell their inventory on to resellers before payment is due, easing the demand on their cash flow.

Invoice Factoring

Invoice factoring allows wholesalers to access cash in advance of payment by customers. The factoring company extends an advance on the invoice to the wholesaler (generally 80% to 90% of the invoice total). Next, the factoring company collects the full invoice payment from the wholesaler’s customer. The factoring company deducts its fee (typically around 2% of the invoice) and pays the remaining balance to the wholesaler.

Wholesalers often need cash to fund general operations, meet payroll, and make inventory purchases. Yet their cash flow may be trapped in unpaid invoices. Mature businesses usually meet this need for immediate cash by accessing a credit line from a bank. However, wholesalers may be new businesses with limited creditworthiness. In that case, traditional credit facilities such as bank loans can be difficult to secure. Since factoring companies evaluate the creditworthiness of invoice payees, and not the billing business, factoring is often a cash flow solution for businesses that would not qualify for bank loans or credit lines.

Purchase Order Financing

In a typical Purchase Order (PO) financing scenario, a wholesaler lacks the cash or inventory to fulfill a large order. The wholesaler receives a quote from the supplier for the cost of the inventory needed. They then take this quote to a PO financier, who advances the funds to purchase the inventory. Once the customer pays, the PO financier deducts their fees and sends the remaining balance to the wholesaler.

PO financing is a viable option for wholesalers who lack the cash on hand (or credit access) to fulfill a significant volume of orders. The PO financier solves the cash flow problem, for a price. The price varies, but is often in the neighborhood of 2% per 30 days. If these fees are manageable, PO financing can enable a wholesaler to rapidly expand their business.

Inventory Loans

Inventory Loans are a temporary loan or line of credit extended to purchase inventory. The inventory is considered collateral for the loan. Because the loan is collateralized, credit standards are comparatively relaxed relative to standard business loans.

Inventory Loans can make sense for a wholesaler in growth mode who wants to take on more inventory than their current cash flow allows. While inventory purchased through debt costs more than buying outright, it can be a worthwhile investment for accelerating growth. To minimize risks, wholesalers should carefully align their inventory purchases with expected sales to ensure they can move the stock efficiently.

Business Credit Lines

Lines of Credit (LOC) are loans that allow a business to spend up to a preset amount. Lines of credit are commonly offered by mainstream banks and credit unions, in contrast to the more niche financial instruments previously covered in this article. There are replenishing and non-replenishing LOC.

The replenishing LOC has credit limits that are automatically renewed as the borrower pays back the loan, much like a credit card. LOC can be secured by collateral or unsecured. Secured LOCs are cheaper; unsecured LOCs require better credit. When applying for additional financing, banks look adversely at businesses that have more than 30% of their LOC in use.

Wholesalers should consider using lines of credit (LOCs) once they’ve established their creditworthiness to secure favorable rates. However, caution is needed with secured LOCs, as a financial misstep could risk business assets. Generally, LOCs are more accessible to wholesalers with a proven track record, which makes them attractive to banks.

Leveraging Smartphone Financing to Scale Your Wholesale Phone Business

We’ve examined a variety of financial options available to wholesalers for smartphone financing, each serving unique needs at different stages of growth.

• If a wholesaler is seeking to incentivize more business, a smart strategy is to offer net terms to resellers. Likewise, a wholesaler can use net terms on their inventory purchases to reduce demand on their scarce cash reserves.

• New wholesalers often lack access to credit facilities from a bank. When they need immediate cash, they can leverage their unpaid invoices by using an invoice factoring company to get an advance on the money they are owed, for a fee of about 2% of the invoice.

• Purchase Order (PO) financing allows a wholesaler to get funding for the specific purpose of buying inventory for orders that have already been made. The PO financier will provide cash to acquire the necessary inventory to fulfill the orders. The cost of financing is around 2% per 30 days.

• When a wholesaler wants to buy inventory but doesn’t yet have orders (ruling out PO financing), they can pursue an inventory loan. The lending entity will consider the inventory as collateral for the loan, reducing the credit requirement to qualify for the loan.

• Wholesalers that have been in business for a while and have good credit can qualify for a Line of Credit (LOC), which is a kind of business loan. If the LOC is of the replenishing type, it functions like a credit card, enabling the business to use credit on demand, pay it back, and then access more credit as desired, up to the limit of their LOC.

Carefully model the growth prospects enabled by taking on financing, and determine whether the cost of the financing is reasonable for the benefit that it provides and the risk it entails.

WeSellCellular is ready to assist wholesalers and resellers with one of the perennial challenges in the mobile industry: finding a reliable supply of high-quality smartphones. WeSellCellular has a deep and accurately graded inventory of wholesale iPhones and Samsung devices. For qualified customers, Net 30 terms are available.