Leading financial institutions of India offer short-term business funding, like channel financing, with the help of which, corporations can finance several partners such as retailers, distributors, suppliers, transportation agencies, etc.
This financial regime is incorporated by businesses so that the vendors and distributors of a company do not face any delay in payments can be defined as channel financing.
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Types of channel finance
Channel financing can be broadly categorized into two segments – vendor finance and dealer finance.
Vendor finance
The type of channel finance, availed to streamline the payment system between vendors, suppliers and the corporation, can be termed as vendor financing. It’s one of the common options of financing for small businesses.
Several financial institutions provide these loans to help a company make payments for the supply of materials. Vendor financing is advantageous for both parties, i.e. supplier and the corporate.
Corporate
From the corporate’s point of view, the workflow will not be interrupted, as running out of funds during the manufacturing process is highly unlikely. Moreover, the organization can also use vendor financing as a marketing tool to build a strong relationship between the supplier and the corporation.
With the help of vendor financing, businesses will gain a consistent supply of goods, which if marketed properly, can improve the working capital of the corporation. More funds in the hands of the suppliers should negate any delay and thereby help in getting the finished goods ready at a quicker time, thus improving the overall cash flow.
Supplier
From the supplier’s point of view, payments from the corporation regarding the supply of goods are never delayed due to vendor financing. This leads to a lesser chance of debts, which transcends to improved productivity as cash flow is never interrupted. Moreover, vendor financing also helps to keep a steady market rate on goods amongst all competitors.
Dealer finance
When business owners avail channel finance to facilitate the distributors of finished products, it is referred to as dealer finance. In this variant of channel finance, the terms and conditions of the discounts on bill payments, offered by the corporation, are agreed by the distributors. Just like vendor finance, dealer finance is also beneficial to both the corporate and the dealer.
Corporate
From the corporate’s aspect, dealer finance helps to ensure availability of funds in the final segments of the supply chain of the business module. With this financial tool, corporations can improve the relationship between themselves and distributors; a company may also implement a rewarding system for bonus distribution of finished goods, which can lead to a major improvement in sales.
Dealer
Dealer finance is advantageous to the distributors the same way as mentioned earlier. This removes any possibility of debt and with the inclusion of bonus rewards, the distribution agencies can aim for a higher profit margin.
As a channel partner or a corporate head, if the above financial tools are not adequate, you can always opt for a small business loan from leading financial institutions and avail up to Rs.30 lakh with affordable interest rates. NBFCs like Bajaj Finserv provide such financing options along with numerous borrower-friendly features such as Flexi Loans, multiple repayment tenors, etc.
They also bring forth pre-approved offers that make availing financing simple and straightforward. Such offers apply to numerous other financial products such as personal loans, business loans, etc.
Corporate businessmen who have adopted corporate finance techniques have ensured their firms remain operation at every step. They have also contributed considerably to the growth of India’s GDP via their businesses.
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