{"id":12967,"date":"2020-11-20T06:24:00","date_gmt":"2020-11-20T06:24:00","guid":{"rendered":"\/blog\/?p=12967"},"modified":"2020-11-20T06:24:39","modified_gmt":"2020-11-20T06:24:39","slug":"is-supply-chain-financing-part-of-growth-plan-in-india","status":"publish","type":"post","link":"https:\/\/tata-blog.osian.dev\/blog\/circulating-capital-loan\/is-supply-chain-financing-part-of-growth-plan-in-india\/","title":{"rendered":"Is Supply Chain Financing Part of Growth Plan in India?"},"content":{"rendered":"\n

Growth is\nessential for the survival of any business in the long run. It fuels asset\nacquisition, enables easier funding for investments, and attracts new talent to\nyour enterprise. Growth is also the primary force which drives performance and\nprofit. Sustained business growth entails a sustained growth of the economy,\nand thereby of the entire country.<\/p>\n\n\n\n

For the\nbusinesses to speed up their growth rate, a steady influx of capital is\nnecessary. One of the ways to ensure a secure stream of working capital is to\nopt for supply chain financing.  <\/strong>Supply chain finance is a premiere\nfinancing tool which optimizes and accelerates cash flows by extending\nshort-term finance to dealers and suppliers, which are integral components of\nthe supply chain of large-scale companies.<\/p>\n\n\n\n

Where is supply chain financing useful?<\/strong><\/h2>\n\n\n\n

Let\u2019s\nillustrate the use cases of supply chain financing with the help of an example.\nLet\u2019s consider a distributor that is a part of a large-scale company\u2019s supply\nchain. Now, buying the company\u2019s product in bulk can provide the distributor\nwith huge discounts on their purchase, which itself can govern the profit\nmargins. But where to get the exorbitant amount of money to purchase in the\nfirst place. That\u2019s where supply chain or working capital finance comes into\nthe picture. <\/p>\n\n\n\n

Alternatively,\nsuppose the large-scale company changes its payment terms from 20 days to 60\ndays. In such cases, the change of terms can directly affect the distributor\u2019s\ncash flow in the supply chain, since slower payments could render them\nincapable of making subsequent purchases. In such circumstances, the large\ncompany could opt for a reverse factoring plan, which is a subset of supply\nchain financing, to provide the distributors with enough capital to make\nfrequent purchases. <\/p>\n\n\n\n

To acquire\ncapital from supply chain financing, the buyer needs to approve their\nsupplier\u2019s invoices by a lender.<\/p>\n\n\n\n

Additional\nRead:<\/strong> Planning\nto avail a working capital loan? It just may be the best thing for your\nbusiness<\/a><\/p>\n\n\n\n

Advantages of supply chain financing<\/strong><\/h2>\n\n\n\n

To provide funds\nto the supply chain, a considerable sum of cash is necessary, which is usually\nshelled out using loans. But loans require upfront collateral and may charge\nhigher interests rate, constricting your cash flows even further. But such is\nnot the case with supply chain financing. Here are some advantages of working\ncapital financing.<\/p>\n\n\n\n