Supply chain is a network that connects a manufacturer with suppliers, sellers or dealers and buyers. The stability and efficiency of this chain is significantly vital for business growth.
Additionally, it becomes more crucial for B2B transactions where the manufacturers sell via a network or channel of distributors or dealers. To ensure an effective relationship between all entities, financial stability for this channel is crucial.
Thus, as a convenient way, firms can look for channel financing that enables them to raise funds to manage their working capital and scale business growth. This financial assistant can be an excellent method to keep up healthy cash flow as well.
An overview of channel financing
Channel financing is a particular type of credit that helps companies to extend their working capital and manage a healthy B2B relationship with large business entities or corporates. Therefore, it can help the distributors to develop and expand their business smoothly.
The fundamental purpose of this credit facility is to offer integrated financial and commercial assistance to the distribution and supply network of a concerned industry. Moreover, it also supports and strengthens the commercial relationship between corporates, their dealers and clients. Therefore, manufacturers and dealers, both can avail channel financing to stock up a variety of goods by infusing working capital to the channel partnership business.
Why channel finance is important for supply chain
1. Advance payment to suppliers
With channel financing, sellers can receive transaction payments faster from the lenders itself. Various loan providers directly integrate with a POS system, and hence it speeds up and streamlines the entire repayment process. Therefore, this type of business financing is efficient for the networked or supply chain sector.
2. Alternative to delayed bills receivable
One of the biggest problems and risks of this B2B supply chain is delayed payment for already sold goods. It can create a deficiency of funds for a further increment of inventory or client generation.
Thus, sellers can also look for invoice financing that provides short-term borrowing against unpaid invoices from clients. It assists in improving cash flow, paying suppliers and employees. Moreover, with this credit facility, sellers can reinvest the fund in business operations and grow faster as they do not have to wait for their customers to pay in full.
3. High credit value available
Depending on financiers, manufacturers and suppliers can avail substantial financing up to Rs.30 lakh as channel credit. This amount can be assigned to different avenues like employee salary, inventory expansion, etc.
4. Hassle-free automated process for approval
As the entire processing of applications is computerised and automated, it can reduce the effort and time of the approval procedures; sellers can receive the loan amount in real time.
Borrowers only need to assess how much working capital does their business require and apply accordingly.
Nonetheless, manufacturers or dealers can also consider a Business Loan at competitive interest rates from well-known financial institutions like Bajaj Finserv as an alternative option. They can avail this collateral-free credit up to Rs.20 lakh instantly and increase their working capital and cash flow.
To sum it up, with the help of channel finance, a borrower can simplify various complexity of B2B transactions and focus on new business generation and inventory enhancement. Moreover, it also helps a manufacturer to create a financially stable and motivated network of sellers and develop their business with ease. Nonetheless, borrowers must analyse other financing facilities before choosing a working capital loan to fund business operations in the supply chain.