Using channel financing, the bank meets the various funding requirements in your supply chain at the supplier’s end, facilitating continuous business flow throughout your organization. Providing working capital funding through a credit facility called channel financing.
Channel financing can be applied by supply chain investors and financial institutions, counting distributors and dealers. Lenders usually provide this type of financing through bill discounts and cash advances.
In addition to competitive interest rates, channel financing offers a range of loan terms starting as low as 15%. Business owners can obtain working capital through Channel Financing, an advanced method of funding. The supplier has to raise invoices, and the dealer must approve them. Funds are disbursed into the supplier’s account after verification and approval by the lender.
With channel finance, suppliers gain immediate access to sales proceeds, making them practically cash sales. However, the corporation receives a credit equal to the term of the loan, allowing it to manage its liquidity more effectively. The following are some notable benefits of invoice financing.
Approval within 24 hours:
An easy loan application process is involved in channel financing. The funding can be cleared in as little as three days if all the documents are in order.
Working capital with a high value but no security:
Through channel financing, eligible profiles can obtain a loan of up to Rs 7.5 lakh without collateral.
An easy-to-use loan account management system:
You can conveniently operate and manage your loan account from anywhere with any device.
Flexible Repayment:
Payments are made smoothly throughout the tenure due to flexible repayment terms. Repayment of the loan can be either short-term or long-term, depending on the company’s revenue. A twelve-month, an 18-month, a 24-month, or 36 months is available.
Easy eligibility criteria:
Channel financing is available to eligible micro, small, and medium-sized enterprises (MSMEs). Owners of small businesses should:
- Have a turnover greater than ₹7.5 lakh
- Own either a residential or a commercial property
- A vintage of at least two years is required
- Possess an ITR of at least 1.5 lakhs
Benefits of channel financing
It is fundamentally important for channel financing to ensure the seamless and sustainable operation of all business units. It is important to note that channel financing is a need-driven proposition. The program is designed to assist entrepreneurs operating in a specific industry with their needs.
Generally, channel financing is unsecured funding that caters to the needs of a particular supply chain channel. Lenders also meet these funding needs through business loans. Dealers, merchandisers, and vendors can take advantage of tailor-made loans to meet their short-term business needs. The following are some of the most prominent benefits of channel finance:
- An opportunity to borrow a large amount of money without pledging collateral.
- There is an opportunity to increase working capital to meet short-term financial needs.
- Funds are available quickly and promptly to meet immediate, business-related needs.
- Simple eligibility criteria and required documents can be met to obtain financial assistance.
Individuals who wish to take advantage of this financing option should choose a lender who offers a high loan value at a nominal interest rate. Moreover, borrowers should determine the terms and conditions associated with customized channel financing.
Faster payments:
From the channel finance provider, sellers receive immediate payment for their sales. POS (Point of Sale) systems are connected directly to channel finance providers, speeding up the payment process for sellers.
Improved efficiency:
In addition to improving efficiency, the seller has fewer obligations to chase payments or verify customers’ creditworthiness since the finance company assumes all of those risks.
Collateral-free finance:
One doesn’t need to worry about collateral with channel financing because financial institutions provide funds against unpaid invoices. It simplifies and speeds up the funding process.
Increased liquidity:
When payments are received on time, liquidity is created, and bad debts are less likely to occur. It is also possible to enhance efficiency and productivity with uninterrupted cash flow.
