The building materials industry — including lumber distributors — is a core sector of the U.S. economy, so there is an ongoing need to connect suppliers to ultimate users of these products. According to Principia, a consulting firm focused on providing market insights and business strategies, the sector tends to be cyclical — closely tied to the overall economy and demographic changes — so political changes, technology advances, and economic cycles can result in short-term turmoil that can cause operational and financial challenges.
On top of that, lumber distributors and other companies in the building materials industry must be cognizant of the following trends, according to Venveo, a team of strategists, designers, and developers built to help clients reach their business objectives:
- The need for a strong digital presence
- The decline of trade shows as lead generators
- The new differentiator of thought leadership
- The rising importance of video, social media and mobile
- The slowdown of smart home technology disruptors
- The value of automating and scaling marketing efforts
While the lumber distribution sector — along with the entire building materials industry — is projected to grow, only companies that stay ahead of the curve with their marketing and sales efforts will create competitive advantages for themselves. And that can be challenging, given the realities of the business.
The Business Realities
Selling lumber to general contractors and construction companies can be challenging from a cash flow perspective because lumber distributors are at the mercy of their customers’ strict payment stipulations; that means they don’t have control over when they get paid. It’s not uncommon for lumber distributors to face 60-day net terms, which can leave them in a bind since they still need to pay for supplies, cover payroll and fund other operating expenses.
Facing short-term cash crunches can certainly affect lumber distributors’ day-to-day operations and stunt their long-term growth — as they may be unable to build up inventory; respond to new opportunities that arise; and put forth a strong, on trend marketing effort. Having the ability to manage cash flow is often the difference between a flourishing lumber distributor and one that is struggling to keep the doors open.
The Solution: Working Capital Financing
Lumber distributors that need to overcome short-term cash flow issues have solutions available to them. Whether payments are in the pipeline but the bills still need to be paid — or an opportunity exists to support new and larger projects if supplies can be obtained, a working capital loan is a perfect way to maintain “business as usual.”
Turning to alternative financing sources like CSC for working capital loans offers significant benefits to lumber distributors — such as no collateral requirements, less paperwork, and the availability of access to cash for early-stage businesses. Perhaps most importantly, they can receive the money quicker than they would by working with a bank; CSC normally does same-day funding, with 72 hours being the worst-case scenario.
The Takeaway
Lumber distributors need to make sure they can maintain their operations in the face of accounts receivable taking up to 60 days to be paid. They also want to be able to respond to new opportunities without straining their resources and maintain a robust 21st-century marketing presence. The solution to all those situations can be a working capital loan from CSC.