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The short answer
Wholesale cannabis sellers wait on payment. Factoring turns an unpaid invoice into cash today for a fee.
Inventory financing lends against stock on hand. Both cost more than a standard line, so price each invoice.
On this page
- Invoice factoring for wholesalers
- Receivables purchase agreements explained
- Inventory and bridge financing
- UCC filings and lender protections
- Reading a lien filing
- Cost versus waiting 60 to 90 days
- Who qualifies
- A worked example: one invoice, sixty days
- Checklist before you sell an invoice
- Terms to know
- Frequently asked questions
Invoice factoring for wholesalers
Factoring converts a sale into cash now. You pay a fee for the speed.
Invoice Factoring Cost Estimator
Work out what turning one invoice into cash really costs.
How to use this: Use one real invoice. Enter the advance rate and fee your lender quoted. Results show net cash and an annualized cost.
Receivables purchase agreements explained
An agreement names the invoices, the advance rate and the fee schedule. It also names who bears the loss if a buyer never pays.
Read the definitions of default and dispute. They decide how much risk you keep.
- Which invoices qualify and which are excluded.
- How fees accrue: per day or per 30 day block.
- Who contacts your customer.
- What triggers a charge-back to you.
Inventory and bridge financing
Inventory loans lend against stock you can prove you hold. The lender will want counts, cost records and seed-to-sale reports.
A bridge covers the days between buying product and selling it.
| Product | Collateral | Watch for |
|---|---|---|
| Inventory loan | Stock at cost value | Advance lower than cost |
| Inventory bridge | Purchase orders | Short term, fees up front |
| Line with inventory covenant | Whole business | Reporting requirements |
UCC filings and lender protections
A UCC filing tells other lenders you have pledged assets. A blanket lien can block your next loan.
Ask for a narrow lien that names only the invoices or stock being financed.
Reading a lien filing
Liens are public. UCC Article 9 governs secured transactions, and Part 5 covers filing.
A financing statement names the debtor and describes the collateral. Search for your own business name before you apply.
Compare factoring and a line in line of credit vs invoice factoring.
Cost versus waiting 60 to 90 days
Waiting costs you flexibility. Factoring costs you a fee. Price both.
If your invoice pays in sixty days and a rival delivers in thirty, speed matters.
Use the estimator above on your slowest-paying customer first.
Who qualifies
Funders weigh your buyers closely. Licensed buyers with a record of paying help the file.
- Invoices owed by licensed buyers.
- Clean delivery records and signed manifests.
- No disputes on the invoices you want to sell.
A single concentrated customer raises the lender's risk and your price.
A worked example: one invoice, sixty days
These figures are an illustration. They match the estimator above.
A brand ships $50,000 of product to a licensed retailer. The funder advances 80 percent, or $40,000.
The fee is 2 percent per 30 days. The buyer pays in 60 days, so fees are $2,000.
The brand nets $48,000 in total. The annualized cost on the $40,000 advanced is about 30 percent.
| Step | Calculation | Result |
|---|---|---|
| Advance | $50,000 x 80% | $40,000 |
| Fees | $50,000 x 2% x 2 periods | $2,000 |
| Net cash | $50,000 - $2,000 | $48,000 |
| Annualized cost | $2,000 / $40,000 x 365 / 60 | About 30% |
Checklist before you sell an invoice
Confirm delivery
Signed manifest and receiving record.
Check for disputes
No open credits or returns.
Read the contract
Fees, recourse and lien scope.
Tell your customer
Know who will contact them and when.
Terms to know
| Term | Plain meaning |
|---|---|
| Advance rate | The share of an invoice paid up front. |
| Reserve | The held-back share released after your buyer pays. |
| Recourse | Your duty to repay if your buyer does not. |
| Concentration limit | A cap on how much one buyer can represent. |
| Blanket lien | A claim on all your assets, not one invoice. |
| Manifest | The delivery record that supports an invoice. |
Frequently Asked Questions
Sources and further reading
- Federal Reserve, Small Business Credit Survey
- CFPB, Small Business Lending Rule FAQs
- FinCEN guidance FIN-2014-G001, Marijuana Businesses
- Cornell Law School, UCC Article 9 (Secured Transactions)