Wholesale money is a means of raising needed business capital by securing a large loan from a bank or financial institution, rather than attempting to generate the needed capital by means of issuing bonds or share to a series of investors. Generally, wholesale money is a revenue strategy that is confined to established businesses and is often extended by banks and financial institutions to long standing corporate clients. Wholesale money involves a loan situation, rather than a line of credit to be drawn upon, and often carries very competitive interest rates.
There are a few advantages to using a wholesale money approach when funds are needed for some business purpose. One of the most obvious is that the process allows the company to begin using the funds immediately. Once the large loan is secured and the proceeds deposited into the appropriate corporate account, the intended purpose can be undertaken immediately. This can be especially helpful when the reason for the wholesale money loan has to do with launching a market promotion with a very narrow window of opportunity.
Second, wholesale money often involves loans with very liberal terms. Often, the corporation can command an excellent interest rate with the loan. This means adding a line item to the budget in order to meet the scheduled payments on the outstanding balance, but it also means no time and effort consuming process to issue additional shares of stock or put together a bond issue. In some instances, funding a project with wholesale money can cost a great deal less than other fund raising means.
However, there are a few things to keep in mind about wholesale money. Like any loan, it is important to make payments on time. If the project is not expected to begin generating revenue within a short period of time, care should be taken to make sure the company can manage the payments on current revenue streams. When this is not likely, or will put the company in a severe financial situation, raising funds by a bond issue or other means may be a much better strategy.
