SBA loans for lumber, plywood and millwork wholesalers: working capital through a price cycle

Two kinds of loan in one industry

Lumber, plywood, millwork and wood panel merchant wholesalers (NAICS 423310) buy from mills and manufacturers and sell to lumberyards, dealers, builders and contractors. Some move commodity framing lumber and sheet goods by the truckload; others specialize in millwork, such as doors, windows, molding and stair parts, often cut or assembled to order.

The SBA approvals split in two. Nearly half, 48.9%, went through SBA Express, which caps loans at $500,000; loans of that size typically fund inventory, receivables, vehicles and equipment. At the other end, 30 loans, 22.9%, were $1 million or more, and the 90th percentile was $2,591,200: yard purchases, warehouse expansions and acquisitions. The middle half runs from $112,500 to $815,000, a wider range than the median of $250,000 suggests. Across all 131 loans, $99,915,700 was approved by 57 lenders.

The median rate was 10.25%, level with the national median, with the middle half from 9% to 11.25%. That spread tends to follow loan size: small Express loans fall in SBA's higher cap bands, and large loans sit in the lowest band, base rate plus 3% above $350,000. Fixed-rate loans were 18.3%, and the median term was 120 months. Start-ups were only 8.4% of loans, and the median loan supported 5 jobs.

The price cycle in the P&L

Wood prices move a lot, and a distributor's results move with them. When prices rise, inventory bought earlier sells at a higher price and margins widen; when prices fall, the distributor is selling stock bought at yesterday's cost into today's market. A year of rising prices can make a business look far more profitable than it will be in an ordinary year.

Lenders know this, so they rarely underwrite on the best recent year. They look at several years, ask which ones were helped or hurt by price moves, and size the loan on what the business earns through the cycle. A simple illustration: a distributor that earned 1,500 in a year of rising prices and 900 the year after may be underwritten nearer the lower figure, or on an average, not on 1,500. SBA's minimum debt service coverage is 1.15x, and from 1 October 2026 a change of ownership must show 1.25x on historical results, so the choice of year matters.

If one year was flattered by rising lumber prices, say so first. A lender that finds it on its own will discount every other number too.

Millwork is steadier. Its prices track labor and specification more than commodity markets, and margins hold better, but special-order inventory is harder to sell if a project cancels. A business that mixes both should show revenue and gross margin for each line separately.

How lenders count the balance sheet

Distributors carry a lot of inventory and receivables, and both can support borrowing. Lenders value each asset for what they could collect, not what it cost.

A borrowing base also commonly caps any single customer at 20% to 25% of eligible receivables, which bites for a distributor that sells heavily to one large builder or dealer. See how a borrowing base works and inventory advance rates.

Contractor credit and the building season

Lumber and millwork distributors extend credit to contractors, and contractors pay when they are paid. When building slows, receivables stretch and some contractors fail. Lenders read the AR aging by customer closely: how much is past terms, who the largest accounts are, and whether the business uses lien rights and joint checks on large jobs to protect itself. See what lenders look for in an AR aging.

The need for cash is seasonal too. Inventory builds ahead of the spring and summer building season, receivables peak in summer, and cash comes back in the fall. A term loan sized to the peak leaves the business paying interest on idle money for half the year. That helps explain why so many borrowers here use SBA Express or a seasonal line of credit, and why larger distributors often move to an asset-based line as they grow.

Buying a lumber or millwork distributor

Acquisitions were 14 of 131 loans, 10.7%, close to the national 10.4%. The median acquisition loan, $1,657,500 at 9.88%, is more than six times the median loan in the industry: a loan that size buys an established distributor with inventory, receivables and a yard, not a start-up.

• The buyer injects at least 10% of total project costs. Seller financing counts toward up to half of that only on full standby for the life of the SBA loan; a note that pays is debt and counts in debt service.
• An independent business valuation is required where the amount financed, less appraised real estate and equipment, exceeds $250,000. Appraised real estate and equipment are subtracted before that test, but at a median acquisition loan of $1,657,500 most purchases will still need a valuation, and the loan cannot exceed it.
• From 1 October 2026 (SOP 50 10 8.1), financial due diligence is required on every change of ownership, and acquisitions of $3 million or more excluding real estate need a quality of earnings report. A QoE on a distributor will test inventory valuation and the price-cycle effect directly.
• From the same date, the loan amortizes over no more than 10 years except the real estate share.
• No earnout to the seller is allowed. The seller may consult for up to 12 months, or up to 24 months from 1 October 2026, which matters where the seller holds the supplier and contractor relationships.

Supplier relationships deserve their own diligence. A distributor's access to mill allocations or to a manufacturer's millwork line can depend on the seller personally. See financing a building supply company acquisition, which covers the retail and dealer side of the same trade, and the working capital peg, which in an inventory business can move the price materially.

Preparing the file

Build from Transparent's SBA checklist: 2–3 years of business and personal tax returns, P&L, balance sheet, year-to-date P&L, a debt schedule with notes being refinanced, and a personal financial statement for each 20%+ owner. Add what a lender needs for a distributor: an AR aging by customer with days outstanding, an inventory report split between commodity stock and millwork, gross margin by product line, and a note on how pricing moved each year. For a purchase, the target's latest full year and the letter of intent.

The 31 SBA 504 loans, at a median of $1,087,000, show how often distributors buy their yards. If the property is in play, compare 7(a) and 504 before settling the structure. Transparent's book includes 278 lenders writing SBA 7(a) and 504 and 235 writing asset-based loans and lines, so a distributor can be shown to both, with the full lender package built in a day once the documents are in.