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Use case

Bulk purchase discounts funding: how to size it and what to watch.

A supplier discount is only worth taking if the savings beat the cost of the money.

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What this looks like

A supplier discount is only worth taking if the savings beat the cost of the money.

Distributors, retailers and restaurants are often offered meaningful discounts for buying a season's stock at once or paying early. The cash to take the deal is the obstacle.

How to size it

Compare the discount in dollars with the cost of the advance in dollars. A 12% discount on $40,000 of stock saves $4,800; if the advance costs less and the stock sells on time, the deal works.

Illustrative arithmetic

A hardware store depositing about $70,000 a month asks for $35,000 for a pre-season bulk order. At a 1.18 factor the payback is $41,300, a cost of $6,300. Over roughly 4 months that is about $492 per business day, or close to 15% of monthly deposits.

  • Total payback: $41,300.
  • Cost: $6,300.
  • Payment: about $492 per business day, close to 15% of monthly deposits.

Every figure on this page is illustrative arithmetic in Canadian dollars. It is not an offer, a quote or a promise of approval.

Which structure tends to fit

A short advance repaid as the stock sells suits a one-time buy. Revenue-share structures fit recurring bulk purchases.

Where it goes wrong

Before you apply

Typical starting points

Monthly revenueTypically from around $20,000 a month in deposits for Canadian files. The exact line varies by funder and by file.
Time in businessTypically about 12 months. Newer businesses can be reviewed, but the options narrow.
Account healthLimited low-balance or negative days. Funders read the last few months of bank statements for this.
CreditScores from 500 are considered. A score of 600 or higher opens more options and better offers.
DocumentsA signed application and recent business bank statements, typically the last four months.
Existing advancesFiles with an existing advance can be reviewed, including second position.

A quick test

Divide the cost of the advance by the discount. If the result is well under one, and you are confident the stock sells within the repayment period, the purchase pays. If it is close to one, the deal is a wash and the risk of slow sales tips it against you.

Common questions

How much should I ask for?

Ask for the amount you can name in dollars and tie to a quote, invoice or schedule. A smaller, specific request is easier to approve and cheaper to repay.

Which structure is best?

It depends on whether the need is a one-time purchase or a recurring gap. See the comparison pages for the trade-offs.

How fast can I get it?

Decisions are often the same day on a complete file, and funding can follow the next business day.

Keep reading

Funding use casesPayroll, inventory, expansion and moreMerchant cash advance CanadaHow an advance against future card sales worksRevenue-based financing CanadaRepay a fixed multiple as a share of revenueCash-flow affordability calculatorCan the month carry the payment?Underwriting situationsCredit, NSFs, time in business and more

Educational information only. It is not legal, tax or accounting advice.

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