Risks and uncertainties are an integral part of any business activity especially in the contemporary business enviournment. We often come across businesses having shortage of finances as a result of changing market conditions. This is more so amongst the MSMEs and Start-ups who are in the constant need of finances for their growth and journey. This may have an impact on the essential business operations which are being temporary in nature. However, there are ways and means which provide opportunities for businesses to redeem themselves in terms of finances for their organisations. Supply chain finance is one of the means by which organisations can continue doing the businesses even in times of financial shortages. It is a kind of an activity which helps business to continue doing their activities without worrying about short of cash flow.
Basically, Supply chain finance is a process of availing financial assistance from financing institutions at a time when business requires funds on an urgent basis to continue with its operations. It involves with providing funds to organisations to fulfil their working capital requirements for their growth and development. Companies not having a lot of capital tend to feel trapped when clients and customers do not pay their dues on time. This is where supply chain financing comes into the picture and plays its role. There are supply chain finance companies in India which offer this facility for small, medium, and large-scale businesses. There is a well defined process which quite streamlined by which easy short-term loans for the companies for their finance requirements are processed.
Some of the major aspects of supply chain finance include a system in which the goods and services are sold on a fixed credit period in which the buyer approves the seller in getting financial assistance from a lender or financier. The loan is used for working capital purposes such as production, purchasing of raw materials etc. It benefits both the buyer and the seller. The whole process can also be done online to ensure a faster supply of funds for the business and its various requirements.
The major benefits include its ability to increase the business’s cash flow by creating a constant flow of working capital and ensure the continuation all business operations. Supply Chain Finance has a very easy loan processing and repayment conditions and there is a reduction in administration costs as a result of complete control of business finances. The supply chain finance companies can diversify their risks with the help of short-term loans and clients gain the trust of the seller by facilitating them to seek financial assistance for fulfilling various commitments.
In conclusion, it can be said that supply chain financing must be opted for by corporates who have a background and history of insufficient working capital. Besides, if one owns a goods business and require continuous flow of money, supply chain finance can be a boon for your business.
(The author is Kadam Shah, Founder & CEO, Zuron Fintech, and the views expressed in this article are his own)
