Why cost per dollar decides the outcome
Distributors often earn a modest margin on high volume, so small differences in funding cost matter. Compare the cost per dollar for the months money is actually out against the margin per dollar of goods sold. Roifunder helps wholesale and distribution businesses get funded through our funding partners for inventory, warehouse equipment and receivable gaps.
Margin left per dollar = gross margin per dollar of sales − (funding cost per dollar per month × months tied up)
Example: at a 20 percent gross margin, funding that costs 4 cents per dollar per month on goods tied up for two months uses 8 cents of every 20, leaving 12 cents. If the goods sit for four months instead, 16 of the 20 cents go to funding. Illustrative figures, not typical pricing.
Measure the cash cycle
The cash cycle is how long money stays tied up: days inventory sits, plus days customers take to pay, minus days your suppliers give you. Funding for a longer cycle costs more in total, so shortening any piece of it directly improves the payback. Use your own averages from the last few months.
Cash cycle days = days in inventory + days to collect − days to pay suppliers
Example: goods sit 45 days, customers pay in 40 and suppliers allow 30. The cycle is 45 + 40 − 30 = 55 days, a little under two months. Shaving the inventory days to 30 would shorten it to 40 days and reduce funding cost by about a quarter. Illustrative numbers.
| Months money is tied up | Funding cost per dollar | Margin left per dollar |
|---|---|---|
| 1 | 4 cents | 16 cents |
| 2 | 8 cents | 12 cents |
| 3 | 12 cents | 8 cents |
| 4 | 16 cents | 4 cents |
Volume purchase discount math
A supplier discount for buying more at once only pays if the discount exceeds the cost of funding and storing the extra stock until it sells. Calculate the dollar discount, then subtract funding cost on the added inventory for its average time on the shelf, plus added storage and handling.
Example: a supplier offers 6 percent off a $100,000 order that is three months of stock instead of the usual one-month $33,000 order. The discount is $6,000. The extra $67,000 of stock sits an average of about two extra months; at an illustrative 3 cents per dollar per month, that costs about $4,000, plus $800 of added storage. Net benefit is about $1,200, thin enough that a slower sell-through would erase it. Illustrative only.
Warehouse equipment: forklifts, racking and delivery vans
Warehouse equipment pays back through labor saved, added storage positions and fewer damaged goods. Racking that adds pallet positions can avoid off-site storage fees; a newer forklift can cut downtime and repair bills. Use measured labor hours and current storage invoices, not estimates.
Example: $28,000 of new racking adds 200 pallet positions and ends $2,400 a month of off-site storage and $600 a month of shuttle labor. Gain is $3,000 a month against an illustrative $900 payment, a simple payback of under ten months. Compare structures on equipment financing.
Customers on net terms and the payment schedule
When customers pay on net terms, cash arrives in lumps a few times a month. Daily funding payments can drain the account between those receipts. A line of credit drawn for each purchase and repaid as invoices are collected often fits the distributor cycle better than a fixed daily debit.
Price that pattern with business line of credit math: draw, carry for the cash cycle, repay on collection. Invoice factoring is an alternative some distributors compare for slow receivables. For inventory specifics, see inventory funding payback math.
When not to fund, and how to apply
Skip funding slow-moving SKUs, speculative buys ahead of uncertain price increases, or volume discounts that leave only a thin cushion. With low margins, a small miss on sell-through or a customer paying late can turn a profitable-looking buy into a loss once funding cost is included.
Requirements vary by product and funder; many look at time in business, monthly revenue and credit. Some approvals come within a day or two, depending on documents. Many funders review bank statements and may ask about receivables and major customers. Apply once to compare options.
Frequently asked questions
What matters most for a distributor comparing funding offers?
Cost per dollar per month, measured over your actual cash cycle. Because margins are thin, a difference of a cent or two per dollar per month can decide whether a buy is worth funding. Convert each offer to that figure and multiply by the months your money will be tied up.
Is a line of credit better than a lump sum for inventory?
For recurring purchases that turn and collect on a steady cycle, a line often fits better, because you pay only while a draw is out and can repay as invoices are collected. A lump sum can suit a one-time buy. Compare both using your real cash cycle days.
How do I know if a volume discount is worth funding?
Subtract the funding cost on the extra stock for its average time on the shelf, plus added storage and handling, from the dollar discount. If what remains is small, a slower sell-through or a late-paying customer can erase it, so require a comfortable cushion before funding the larger order.
Can I fund delivery vans or warehouse equipment?
Yes, many distributors finance forklifts, racking and delivery vans. Measure the gain from labor saved, storage fees avoided or damage reduced, and check that it exceeds the monthly payment. Match the term to the equipment's useful life so you are not still paying after replacing it.
Measure your cycle, then apply
Compare inventory and equipment funding for your distribution business through our funding partners.
Updated September 14, 2026 · Roifunder Funding Team