Not many folks are familiar with the concept of wholesale financing or wholesale loans. In the ever-evolving financing marketplace, understanding the mechanisms behind non traditional lending models is crucial for financial institutions and their customers.

Credit Enables Commerce

Did you know that the car dealer in your hometown generally doesn’t actually own the inventory that is being marketed on their lot? Dealers of manufactured goods, whether auto, powersports, agriculture equipment, or even lawn mowers rely on external financing to fund their wholesale acquisition of inventory. Managing a dealership is a capital intensive business - particularly when your inventory runs over $10k per unit.

Giving Smaller Stakeholders a Chance Through Wholesale Loans

Wholesale loans tend to be facilitated by financial institutions (for example, regional or community banks) to businesses that operate within a radius of their physical location due to the operational complexity of running this type of loan portfolio (operations such as inventory audits have traditionally been a strain for lenders), though there are some that have networks throughout the US. There are avenues to financing through Equipment Manufacturers that offer lines of credit to dealers who hold their inventory. These lines of credit allow small-medium sized dealers to efficiently acquire their inventory, and scale their business according to demand.

Wholesale Loans Help Address Consumer Demand

Wholesale loans enable a diverse range of dealer types to operate in their respective markets to cater to the dynamic needs of their customers through providing a robust selection of inventory. Similarly, it enables lenders to access a strong rate of return on an asset-backed credit product while diversifying their loan portfolios. An enhanced relationship with local businesses can help financial institutions grow their business deposit accounts as they earn trust and build an impactful relationship with the leadership of these businesses - further unlocking potential for returns.

Wholesale Loans Leads to Deeper Customer Relationships

For banks, especially those focusing on niche markets or small to medium-sized entities, understanding and leveraging wholesale loans can open new avenues for growth and customer service. As we navigate the complexities of finance, insights into models like wholesale loans become invaluable tools for lenders. With that said, this credit product is notoriously difficult to scale as a result of operational overhead. The need to perform actions such as auditing and asset specific servicing, leave a massive need for technological advancement in this market.On the surface it may look like too much to chew as a new line of business. This is where technology focused on automation paired with lender specific workflows can massively reduce the hurdle to entry, or scale an existing business.

If you have a portfolio and are looking to upgrade how you operate, consider contacting our team of experts today to learn more about the best technology solutions for your inventory financing needs. We are proud to work with Sopra Banking Software to offer a comprehensive, trustworthy, and user-friendly loan management system.