Your Guide to Building Your Brand through Private Label Financing

This article will provide you with the information you need to fully understand what private label is all about and how you can build your brand using private label financing. Because it is important that you first have a complete understanding of the concept of private labeling prior to the financing aspect of it, this article is comprised of two parts. The first part addresses the definition as well as pros and cons of private label financing, while the second part will discuss how private label financing can benefit your brand.

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Part One:

  • What is Private Label Financing and how does it work?
  • What are the advantages and disadvantages of Private Label Financing?
  • How to select a private label financier that can best meet your needs.

Part Two:

  • How to build your brand through Private Label Financing and affiliated programs
  • Business Finance
  • Online Alternative Lending
  • How are White Label Loans different
  • Private Label Business as Profit Makers

Private Label Financing and How it Works

A Private Label product is one which is manufactured by a single company for later sale and/or distribution under another company’s brand. Private label goods are generally available in industries ranging from food, drinks, clothing, shoes, technology, electronic, home décor, health care items and cosmetics, to name just a few. A Private Label brand which is managed by a retailer for retail sale within a specific chain of retail stores is known as a store brand. As the retailer, you will provide the product manufacturer with the specifications you desire for the product. Those specifications could include not just the products’ ingredients, but the specific packaging.

Private labeling is an ideal option for products that can improve the value of other products. Moreover, if you have little or no experience with retailing, you might want to first consider a private label product. Essentially, through Private Labeling you can still sell products that you would otherwise have had no way of manufacturing, plus it is a great way to expose potential customers to your unique product.

The Private Label Manufacturers Association, has reported that, within the United States, the market share of private label goods has nearly reached 25% of unit sales. More importantly, it was also reported that the sector is expanding even faster than national brands.

You might be surprised to learn that you already use private label goods. If you shop at any of the major global retailers, whether online or B&M, such as Amazon, Wal-Mart, or Target and you have used their “brand name” product, that’s a private label good. In the same vein, say you frequent a store that sells “their brand” of ibuprofen, do you think they are manufacturing it themselves? No, they’re definitely not, given the many major constraints (patents and costs, notwithstanding). What they are doing is obtaining the right to sell that product under their name via a private label (namely, in this instance, the manufacturers of Motrin).

A successful private label brand can enrich a retailer’s sales opportunities. A store brand label can even be customized with a store logo or tag line, and through personalization, customer loyalty can be increased.

Another typical example of private label financing is a private label credit card program. Essentially, that is a store-branded credit card which is issued to a customer for general use at a specific store (or chain of affiliated stores) and it will carry the logo of the store (or affiliated chain). The customer’s use of this private label credit card is similar to a typical revolving credit plan which is managed by a bank or other financial institution, i.e. you make regular payments toward your balance (both principal and interest), with your principal balance being restore with the amount of the principal payment.

Interestingly, a private label credit card program will allow a retailer to offer its customers greater discounts and more favorable payment term (including the possibility of deferred payments though customers should understand that interest will continue to accrue). In addition, customers who hold private label credit cards get the benefit of returning items to any store within the chain, without the need to present receipts.

Private Label Financing Advantages

  • Customer Loyalty: One of the key elements to a business’ long term success is the ability to build and maintain a loyal customer base. Building your brand via private labeling is one smart way that those dual goals can be achieved. Customers generally remain faithful to a brand name they know and trust; often, they will go out of their way to purchase a particular brand. With private label goods, which typically have limited availability, you can not only ensure that customers remain loyal, but that you will have made them feel special, among a select chosen few who are permitted to buy it. Eventually, customer loyalty will increase, as will sales among that loyal customer base.
  • Higher margins: Brands which use private labels often generate higher profits, comparatively. The rationale is that the costs for producing or manufacturing your own products via a private label is typically much lower than buying products that are already manufactured, especially if these are high quality products with a strong background in development and marketing.
  • Wholesale income: With the exclusive rights to sell a product, one other option to enhance your bottom line is to wholesale the product and provide limited access and the rights to specific retailers. In so doing, you can further increase your market share by exposing your brand to new customers.
  • Exclusivity: Private labeling gives you a product niche and allows you to separate yourself from the competition. The exclusive rights to offer your product for sale is clearly one of the biggest advantages with private labeling. Marketing the product will also help to generate higher demand which would result in higher sales, simply because you are now the only source for your product.

Private Label Financing Disadvantages

As with anything, there are also potential disadvantages. Fortunately, provided you already have designed a comprehensive plan, you may be able to mitigate the negative effects of the primary drawbacks. Below are a few of the disadvantages to private label financing:

  • Minimum order requirements: The majority of manufacturers will have a minimum order requirement for a private label good, especially if its needs special customization. Quite often, the requirement for a minimum order may be significantly higher than you need or can afford.
  • Dead inventory: Some retailers will place far more orders than they will need. Perhaps it is because of the aforementioned minimum order requirement, but it could very well be that they either failed to market the product or to gauge the interest of their customer base. As a result, you, as a private label retailer, may be left with a great deal of unsold, aka dead, inventory.
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  • Customer perception: In general, consumers tend to have greater trust in a brand they know well or have frequently used. As a result, they may initially distrust an unknown private label brand. That is why it is critical to actively research and question your customer base for their likes and dislikes, before you make such a large investment in a private label good. To that end, there are a number of online research companies which have a massive membership base comprised of consumers from all walks of life. It would be less expensive for you to engage a research or marketing company to conduct an opinion survey on your behalf, than it would to just arbitrarily place an order for a private label good and hope for the best.

How to Select a Private Label Financier Who Meets Your Needs

Research is also critical before you choose a private label manufacturer. With comprehensive research of your target customers, especially knowing their purchasing habits and patterns (which you can ascertain through a company which conducts consumer surveys, as previously mentioned), you will have a good basis on which to make an informed decision. Trade shows (often offered by the Private Label Manufacturers Association) and other networking events can also help you to “test the waters.” You will also be able to gauge your competition and improve your ideas for a private label product before you offer the specs to a manufacturer. If your ideas for an improved private label product are unique, you may want to get a patent for it, to protect your product from copycats.

Part Two

How to Build Your Brand Through Private Label Financing and Programs

Private label financing is a relatively simple concept; essentially, the vendor will provide direct financing to their customers. For vendors, that is often a win-win proposition. By offering a convenient financing option to their customers, they may be able to close significantly more deals, as well as close them faster. That means an improved bottom line for your business.

A private label financing company can offer its customers a few financing options, and customers should carefully consider the benefits of one over the other. Typically, a business line of credit or a business loan can be obtained directly from a private label financing company; all that is needed is for you to apply and have met the standard loan requirements. There are two key benefits to obtaining private label financing. The vendor can often provide the customer with extended repayment terms in addition to deferring revenue recognition. The latter is especially relevant, as a typical lender might have a requirement that you must show sales of a certain amount over a specific period of time (for example, $100,000 a year over the past five years). On the other hand, a private label financing company will take into consideration your potential future sales of the private label good that they have agreed to finance.

In the event a vendor does not provide direct financing, they are often able to arrange for financing from a third party, typically that would be a financial institution with which they may have an exclusive arrangement. The customer would enter into a loan agreement with the third party financial institution. On the face of it, this might seem a “reasonable” alternative, but you will need to read the fine print carefully. It has been proven that the majority of private label customers often prefer to arrange a contract directly with the vendors as opposed to a third party. There is some concern that the other party might infringe on the use of their license, or have some other unintended involvement in the licensing chain. Also important, many customers perceive third-party financing as a debt; moreover, the financial institution or bank may make excessive demands prior to approval.

Under private label financing, a vendor and/or its channel partners have some flexibility through the contract’s life. Because the vendor can manage both cash and risk, it is critical that program agreements are carefully and appropriately negotiated. To that end, be certain that your agreement contains clear and simple language which allows for the non-recourse assignment of the payments terms.

Business Finance

There are two types of business finance; they are debt finance or equity finance. Generally, with debt financing, funds are borrowed from a lender and interest (and principal) are repaid according to the contract terms. Equity financing is the exchange of capital (cash) for part ownership or shares in a company.

Sources of business finance include:

  • Bank loan: A bank loan is money you have borrowed from a bank, credit union or some other financial institution. That financial institution will only grant or approve the loan if your credit rating warrants it, and provided you are able to prove you have the capacity to repay the loan. The principal amount, together with interest, is paid to the bank on dates specified in the Loan Agreement.

More reading: Your Complete Guide to Business Loans and the Outlook for Interest Rates in 2020

  • Business credit card: A business credit card is one intended for use by a representative (or representatives) of a business rather than for an individual’s personal use. A business credit card is typically available to businesses of all sizes. Though interest rates are typically higher than a regular bank loan, they can help a business to build or improve a credit profile in order to improve credit borrowing terms in the future.
  • Invoice factoring: Invoice factoring is a good way to generate cash quickly, but it does come with risk. Essentially, at a discount, you are selling your control of your accounts receivable (you can sell all of your accounts receivable or just a part of it). Your customers would be required to directly pay their invoice to the factoring company; they will “chase” it, if necessary, if your client is late paying. Once the invoices have been paid, the factoring company will pay you the remaining amount of the accounts receivable invoices (the discount they held back), minus their fee.

Online Alternative Lenders

Alternative lending is a term associated with non-traditional funding options that may be available to individuals and/or businesses. Individuals and business owners who have not been able to get a loan or funding from a traditional bank or financial institution are the prime candidates for an alternative lending option. Typically, alternative lenders tend to be far more flexible with the loan approval process, as well as disbursements and the repayment schedule.


If you prefer convenience and versatility then you should place Kabbage on top of your list. It is actually possible to apply to Kabbage online and get approval within minutes and the funds within the same day. It also has very straight and simple eligibility requirements for its business line of credit: you have to be one year in business with $50K annual revenue to be eligible for a credit up to $100,000.

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They don’t need a minimum credit score and are a fantastic option for entrepreneurs with low personal credit. Kabbage looks into your business’s revenue and cash flow, so business owners with a high revenue model will get easy approval. Kabbage also offers unmatched convenience and you can have the money in your PayPal account, bank account, or a Kabbage card. The ease, convenience, low credit score, and speed of approval also makes Kabbage one of the favorites for the woman entrepreneur.

For Against
  • Fast, automated approval
  • Fast funding
  • Convenient and multiple ways to access funds
  • No personal credit score
  • Assessment of business strength


  • High Annual percentage rate



OnDeck offers both term loans and business lines of credit. It is good for you if you may be a good fit for your business if you need fast cash. Online or phone applications take a few minutes and get the funds within 24 hours of approval for a term loan and instantly for a line of credit with withdrawals between $1K -$10K. They also require looser qualification and credit scores for approval.

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Unlike typical banks, OnDeck doesn’t requite collaterals and offers discounts for repeat borrowers.  However, you also have to look out as their loans can be expensive with a high APR.  they also have a fixed repayment plan and early repayment also don’t get any benefits. It might not be the best for startups but definitely, a good option if your business has constant sales and you are looking for expansion.

For Against
  • Funds are available within minutes or a day
  • Low minimum personal credit score required
  • Fast application and processing
  • Fixed repayment structure and no saving of interest on early repayment
  • Fixed daily or weekly repayment
  • For term loans need a personal guarantee and business lien


Lendio serves as a lending market, where the entrepreneurs and lenders with their offers come on a common platform. You can apply really quickly as it is really just a click away. Your application will be scrutinized and requirements matched with the available loans, lenders, and offers and you can choose the plan best suited for your business. The team at Lendio will guide you with their expertise to complete the loan application and get approved. The typical time to get the funds after approval is 2-4 weeks.

The best part of Lendio is the availability of a huge number of small-business loans and lenders. Also, Lendio can match you with other funding agencies too if you are not happy with their offers. With loans starting as low as $500, longer loan term, and short funding period, they offer the best startup loans overall, especially for small business owners. They also offer some of the best plans for women entrepreneurs or business owners.

For Against
  • One-click application
  • Fast scrutiny and processing of the application
  • A huge number of loans, lenders, and offers
  • Personalized supervision and guidance by experts
  • Steep interest rates in some areas or offers
  • Basic qualifications or paperwork required
  • Inquiry in your credit score

How are White Label Loans Different?

A White Label product is that which is made by one company, yet packaged and sold by another (or others) under different brand names. Essentially, a white label loan is a home-branded loan, similar to the home-branded products you might see at many retailers. In a similar vein, a white label loan can provide a customer with a financial product that is very close in nature to a product you might get from a bank or other financial institution. The benefit of a white label loan is, generally, preferable interest rates and loan terms. A white label loan is not only a quality product, but it is also flexible and cost effective. It will come with features much like those from a regular bank (i.e., access to a debit card, ability to re-draw on a line of credit, and specialized or dedicated customer service). One less obvious benefit is that a white label loan does not generally provide features that you won’t use, but that you would often be charged for by a traditional lender.

Private Label Business as Profit Makers

More and more, private label products have grown in popularity among customers with a goal to cutting costs. Some private label segments tend to be more successful, and thus more profitable, than others. Those private label profit centers include:

Clothing and Accessories: Clothing and accessories are, together, an excellent market segment for private label brands. Customers are passionate about discovering something that makes them stand out from the crowd; often, that involves new, unique clothing and brands. Studies show that trend conscious customers tend to own, on average, almost 100 clothing and fashion items.

Skin Care and Cosmetics: The profit margins on cosmetics are among the highest. Women, and more recently, men have become more and more aware of what goes in and on their body. The trend toward vegetarianism and veganism, and using more natural products is growing by leaps and bounds. Moreover, skincare routines are now beginning at an exceedingly young age, in an effort to slow not just signs of aging but potential damage from the environment. Given the move toward skin care products that are healthier, more natural, there is a paradigm shift in the cosmetic industry. That makes this an excellent opportunity for the establishment of a white label product in this sector.

Hair Care: The potential in this market for private label goods continues to grow. Because hair needs vary by individual, the potential within the segment is huge, with a virtually limitless customer base.

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Packaged Food: Of all the products that can quite easily transfer or convert to a private label good, the one to consider is packaged food. Yet again, it is health conscious consumers who are driving the trend toward organic, gluten-free, vegan, non-GMO, etc. Health foods are one sub-segment that is growing among private labels, as is gifts and sweets, which are especially popular among online shoppers. If you have a coffee shop you can white-label your coffee products and offer your customers their desired flavors under your brand.

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What is of interest is that the above mentioned niches all tend to have a common thread, and that is that they all have a short life-cycle (meaning there is a frequent need for purchase) and all are easily marketed online. Influencer marketing, which many social media platforms excel in, can open up a vast audience. It’s also notable that these private label segments have a low barrier to entry. Moreover, with high profit margins and relatively low costs of production (especially in mass quantity), the potential is exponential.

In Conclusion

Basically, any business owner that deals with manufacturers, distributors and vendors can benefit from private label financing in promoting its own brand. No doubt, now that you’ve read about the great things that private label goods and private label financing can do for your business, you’re ready to move full speed ahead. A cautionary note is appropriate here.

Before you consider using private label financing to help build your brand and become profitable, it is imperative that you conduct an extensive research with respect to the following steps:


By Barbara Zigah

Barbara Zigah is a freelance journalist living in NJ. Her online work has appeared in the IB Times, NASDAQ, TalkMarkets, Benzinga, and Seeking Alpha.
Barbara was awarded a B.Sc. degree in Finance from the University of Maryland, and has worked in numerous positions both on Wall Street and on the proverbial Main Street.