Channel financing is a type of credit facility by financial institutions that provides working capital funding to their finance partners, supply chain stakeholders, distributors, dealers, etc. Lenders typically offer this type of financing in the form of bill discounting and cash credit. Thus, channel financing offers extended and convenient repayment terms for business owners who can effectively ensure they face lesser working capital crunches.
Channel financing carries several notable benefits that include the following:
Quick Loan Approval: Channel financing involves an easy loan application process. If the documents are clear, the funding gets cleared in just as few as 3 days.
High-value Unsecured Working Capital: Eligible profiles can avail of a loan of up to ₹50 Lakhs through channel financing without offering any collateral.
Convenient Loan Account Management: The loan account can be operated and managed conveniently through any device from anywhere.
Flexible Repayment: Flexible repayment tenure ensures a smooth payment process. The loan can be repaid within a short-term or long-term depending upon the business revenue. One can choose between 12 months, 18 months, 24 months, or 36 months.
Channel financing is offered to eligible micro, small, and medium enterprises (MSMEs). The business owner should:
Have a turnover of more than ₹7.5 Lakhs
Own either a business property or a residential property
Have a vintage of at least 3 years
Possess ITR of a minimum of ₹1.5 Lakhs
The business owner should offer the following documents when applying for Channel Financing:
Certificate of business existence
ITR for the last year
House and business address proof
PAN card
Profit and loss statements for the past 3 years, etc.
Channel financing is a credit facility that is meant for corporates and stakeholders. It is a working capital loan that is available in the form of bill discounting or cash credit.
The interest rate levied on channel financing is competitive and starts at as low as 12% depending on the loan tenure.
Channel financing is an innovative form of funding that enables businesses to avail of working capital from a third party (a lender in the form of a bank or NBFC). They provide the businesses operating within a supply chain. The supplier sells its invoices or receivables to the financing provider at a discount, and the distributor can make the payment at a later date, often agreed upon by the lender.
The primary objective of the channel finance facility is to provide businesses with funds for their working capital requirements. Through this credit facility, businesses can ensure that their operations go on smoothly without any interruptions.
Channel finance can be availed of by sole proprietorships, partnership firms, limited liability partnerships, and public and private limited companies.
When it comes to channel finance, the maximum limit that you can borrow depends on various factors like the requirements of the business, how long the business has been in existence, its financial situation, and creditworthiness, among others.
Channel finance is different from traditional loans as they are typically extended to individual businesses based on their creditworthiness, while channel finance is based on the strength of the entire supply chain and the transactions within it.