All about Channel Financing You Should Know

Suppliers and customers are the two essential components in a supply chain. To ensure that the supply chain operates smoothly, a business has to maintain a steady working capital irrespective of whether it has funds at hand or not. 

In such a scenario, channel financing can be an indispensable loan. Channel finance provides the necessary funding to facilitate the smooth working of a supply chain. It is a feasible option as it helps businesses to free-up their working capital and also offer cost optimization benefits for the buyer. 

Who offers channel finance?

Once a nearly exclusive domain of large financial institutions, channel financing is now provided by a broader range of credit institutions – from venture capitalists and NBFCs to private equity firms and business-service solution providers. 

These financial entities have made it possible for suppliers not to rely solely on financial institutions to avail funds in their time of need. Without that, a majority of these network suppliers would not possess the means to ramp up their businesses and increase capacity. 

Benefits of availing channel finance 

Channel finance provides a multitude of benefits that makes it a desirable option to finance one's business short-term needs.

a) Procure a collateral-free advance

As far as the country's SMEs and MSMEs are concerned, arranging for collateral could seem like a challenging task. However, you need not worry about pledging collateral when you opt for channel financing. Leading financial institutions and NBFCs offer business loan with zero-collateral as channel finance. 

You get to enjoy easy loan approval from minimal documentation which further accelerates the process of quick disbursal of sum within 24 hours. You can procure up to Rs. 30 Lakh without pledging any of your assets to fund your business.   

b)Apply channel finance online

One of the best sources of business finance, these financial advances can be availed online. You can use your channel finance online account to obtain details of such advances quickly – anytime, anywhere.

c) Enjoy simple eligibility criteria

Availing channel finance is convenient enough due to its simple and convenient eligibility criteria. To avail this, you must be between 25-55 years of age. Your firm must have a business vintage of at least 3 years for ensuring your credibility of obtaining that finance. You are also required to file and furnish the income tax returns from last year. 

Why is channel finance essential for a supply chain? 

Channel finance proves an indispensable source of business finance when it comes to the supply chain. This is because – 

Faster upfront payments 

Sellers/suppliers receive their payment for transactions within relatively shorter prescribed time from a channel finance provider. 

Lower administrative costs

With the risk management handled by the channel finance provider, suppliers can focus on high-value tasks that result in forming a better business. 

Enhances customer relationships

As channel finance providers act as the middle-men, any disputes on payment issues are met within the sellers and buyers – thus removing the chances of customer dissatisfaction with the sellers. Besides, better relationships lead to improved business.

When one caters to a broader spectrum of buyers and corporates – financial constraints can be a significant hurdle. Through channel financing, you can mitigate such cash flow issues, invest in new projects, and grow your business even further. 

Be it a tail-end supplier or a big corporate – channel finance helps one to gain leverage on the strength of buyers and maintain one’s business relations with the stakeholders. With this quick and easy availability, channel finance proves a win-win for all within a supply chain.

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