November 25, 2022

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Why is Channel Financing Important for Medium-Sized Businesses?

3 min read
channel Financing

Last Updated on July 21, 2021 by EricJones

Supply chain financing is rapidly being used by businesses of all kinds to simplify their supply chains and improve their working capital. Medium-sized businesses can gain greatly from giving such financing solutions to their consumers since it is a true win-win situation.

Channel Financing in following ways

Channel financing or inventory finance allows customers to obtain working capital from partner finance companies to purchase inventory from medium-sized businesses. Financiers offer credit, removing the requirement for upfront cash payment or credit from any medium-sized business, allowing purchasers to liquidate much of their inventory and subsequently pay back that amount. Some of these advantages will help you understand why channel financing is significant to medium-sized businesses.

Stronger relations within the supply chain:

To keep a firm moving forward, every member in the supply chain must perform their best. This is especially important for a medium-sized business, which is in the midst of expansion and relies on the supply chain partner firms to keep up. Customers’ financial positions are enhance when they have timely access to finance, ensuring uninterrupted operations and effective trade execution across the supply chain’s many legs.

Increase in Revenue:

Customers can use channel finance to get working capital to acquire inventory from a large firm that provides this service. They can easily trade-in bigger volumes of stock with the help of medium-sized businesses offering financing support. Over time, since customers are well-funded, it helps these businesses boost sales through such channels. Even customers tend to value the buyer-seller connection and prefer disposing of inventory as quickly as possible.

Management of Cash Flow:

Channel financing is also significant when it comes to managing cash flows by ensuring acceleration of cash collections. Rather than providing credit to their customers, medium-size businesses will benefit if they partner with reputed financial institutions to get assured payments on inventory sales from Day 1. When you look up supply chain meaning, you will see that it involves a lot of sequential processes that take up time. With channel financing, the members of the sales don’t have to follow up on payments, which means that there is a huge saving on time.

Lowers the bad debt risk:

A business of any size offering credit to its customers is bound to face non-payment risks. When you use channel financing, you will be able to shift that risk and get them to take those credit calls, the effects of such risks on your business are drastically minimized.

Easy process:

Yet another reason how medium-size businesses will benefit. Is the absolute ease with which they can apply and execute channel finance. With minimum documentation, a simple process, and quick access to capital, the whole process is so seamless. This also means there is no disruption while moving goods through your supply chain just to access funds. While every bank or financial institution will have its own specific requirements, broadly such loans are offer without any collateral. It avoids the step of worrying and arranging for some collateral when they urgently need funds.

Digital benefit:

Processes are becoming more fluid, efficient, and transparent as a result of technology and cloud-based solutions. When it comes to supply chain finance, new payment techniques have changed the game. Using cloud solutions, for example, allows medium-sized businesses and purchasers to improve their relationships. Large companies, such as Bajaj Finserv, offer a simple web-base interface that promises a customer experience that is user-friendly during every transaction and at every stage.

Also Read: How to Calculate Your Fixed Deposit Interest Rate?

As a medium-sized business trying to scale quickly with your partners in the supply chain, it’s important to know how a loan for working capital from channel finance can free up the cash flows stuck within. With regard to small or medium-sized businesses, accessing and managing working capital is often a determining factor in their growth and viability. You can also avail of collateral-free business loans as an alternative and get a high-value loan. Lenders like Bajaj Finserv offers hassle-free business loan of up to Rs.45 lakh that comes with easy eligibility.