Channel Financing is an innovative credit facility for individuals in the supply chain. In this facility, banks offer short-term working capital to dealers and suppliers.
The need for channel financing arises when the stakeholders are not able to generate working capital from their sources. Channel finance is also known as supply chain finance as it is for the supply chain individuals.
It is easy to avail of a facility extended through channel financing. One can apply online for it with minimal documentation. The primary purpose of channel finance is to manage the supply chain in a better manner.
Here is how channel financing can help in better supply chain management!
1. Improves cash flow
One of the most vital benefits of supply chain finance is that it improves cash flows. This facility helps the supplier in receiving early payments. Buyers can delay the payments for the time allowed in the channel financing facility. The entire process boosts cash flows and maintains the supply chain.
2. Provides access to affordable working capital
Channel financing provides a seamless flow of working capital for daily operations. The cost of capital is low. Borrowers can access funds at lower interest rates as compared to other borrowing options. Access to funds is affordable, guaranteed and convenient.
3. Helps in inventory management
Proper management of raw materials and inventory is essential in the supply chain. The facility of channel financing helps in maintaining the inventory in a business. When there is enough capital available at your disposal, you can buy raw materials at better prices and terms. You can also avail of discounts by purchasing raw materials in bulk quantity.
4. Shortens the working capital cycle
It helps in shortening the working capital cycle of a business. When you provide goods and services to customers on credit, you have to depend on the payments. It creates pressure on the working capital. Other short term expenses are also bound to rely on the payments. Channel finance helps in maintaining a healthy working capital cycle.
5. Strengthens relationships
Channel financing establishes a sense of security in the minds of the customers/buyers. It creates a good rapport with the clients. It helps in reducing discrepancies in payments. It also reduces administrative costs as there are no follow-ups needed for payment collection. There are also lesser chances of bad debts. With the help of timely cash flows, it allows the supplier to provide goods and services on time. This facilitates a cordial relationship between suppliers and buyers.
6. Promotes steady growth
The growth of a business is dependent on its working capital. Working capital is essential for the smooth operations of business activities. Channel financing provides adequate working capital for the business. It helps an individual to concentrate on his business rather than worrying about cash flows.
Channel financing is a profitable option for all in the supply chain system. This facility is available through a variety of credit options. Many lenders provide this facility with customized features. You can make the most of it by selecting the right option for your business.
This credit facility is helpful for the efficient management of the supply chain. Bajaj Finserv presents pre-approved deals on business loans, home loans, personal loans and more. It can simplify the loan processing and make it faster.
You can share your basic details like your name and mobile number to unlock your pre-approved loan offers right away.
