Rules that guide business activity transformed dramatically with globalization. The supply chain lengthened as more prominent companies outsourced equipment, capital intensive plants and labour intensive activities to global partners down the supply chain. Companies are now managing a web of third parties to distribute their products efficiently from being manufacturers alone. Therefore, most of the capital deployed is no longer towards financing property or equipment but to finance working capital.
What is Supply Chain Finance
Supply chain finance (SCF) can be understood as a process that involves using a set of tech-based solutions that cuts financing cost, thereby improving business efficiency between buyers and sellers in a sales translation. The cost-cutting is achieved by automating transactions. SCF enables businesses to get short term credit, and it is usually used to optimise the flow of capital for both buyers and sellers.
The most important utility of SCF is providing sufficient liquidity in the supply chain so that the movement of goods is not blocked owing to the shortage of funds. The invoices generated by a business are discounted, and loans are advanced, enabling the businesses to operate without disruption, which could otherwise appear in the form of bill clearance and delayed payments. Besides, a supply chain loan ensures minimal disruption in the manufacturing process.
In essence, SCF provides efficient financing of the value chain. It helps both the buyers and the sellers improve cash flow and reduce the working capital by utilising the buyer’s credit rating. Besides, it helps get short-term credit that allows buyers to lengthen their payment terms and provides suppliers with an option to receive payments earlier.
How Supply Chain Finance Works
SCF requires an external finance provider and an SCF platform. The finance provider settles supplier invoices ahead of the invoice maturity date at a lower financing cost than the supplier's funds. Other parties then share the benefit of the lower cost of funding.
Following the mechanism of supply chain finance.
After an order is given to the supplier, the supplier delivers and invoices the buyer.
Upon approval of the invoice, the buyer confirms that it will make the required payments to the financial institution as and when the invoice matures.
The supplier discounts the financial institution at a discount rate agreed upon earlier.
The buyer makes the payment as agreed with the financial institution.
The buyer can negotiate better payment terms and/or prices with the supplier due to this arrangement.
Features and Benefits of Supply Chain Loan
High value loans: With Business Loan available on Finserv MARKETS, you can procure financing up to Rs. 75 Lakhs which can help address your crucial business’ supply chain requirement right from sourcing and procuring raw materials to logistic management.
Collateral-free financing: One of the most important benefits of Finserv MARKETS is that you get collateral-free loan options. It takes away the pressure on you to pledge your personal and commercial assets to finance your supply chain.
Quick loan approvals: Another benefit that considerably eases the process of availing of a supply chain loan is the 3 minute loan approval facility.
Flexi loan facility: Bajaj Flexi loan available on Finserv MARKETS allows you to withdraw as many times as you require. You can pay interest only on the amount used and lower your EMIs by up to 45 per cent. Besides, you can also repay as per your convenience to suit your business cash flow.
Online Account Access: You can access your supply chain Finance account online anytime, from anywhere.
The interconnected business ecosystem requires more than what the traditional external mode of financing had to offer. With globalisation and lengthening supply chains, the methods for financing require changes. Supply chain finance allows you to harness the tech-based solution to bring more efficiency in capital flow between the buyer, the seller and the financial institution.
Supply chain loans, available on Finserv MARKETS, can allow businesses to avail short-term loans to meet their immediate requirements at lower rates. It optimises the flow of capital for both buyers and sellers. You can, therefore, make most of the funding available on Finserv MARKETS to streamline your supply chain, which is available at simple eligibility criteria and documents.
