Adequate cash flows are the foundation for a company’s existence especially in times of crisis. After a stressful year for enterprises across industries, 2021 brings optimism and hope for a possible comeback after pandemic-induced shutdowns put a great strain on cash flows. However, given the volatility that has plagued organizations over the last year, this financial year brings its own set of concerns.
Bearing this in mind, the importance of channel finance in obtaining working capital for a company has never been greater. Access to ample working capital guarantees liquidity to address short-term requirements and is critical to the company’s survival. In times of duress, channel financing can help accelerate receivables and maintain optimal management of cash flow.
Below are 5 ways how to channel financing can truly optimize a business’ cash flow resources:
Undisturbed cash flows: To ensure smooth day-to-day operations, it’s important to maintain a steady and continuous cash flow stream across the entire supply chain. The pandemic has led to a ripple effect across the supply chain of various industries, both physically and financially. As a result, procuring working capital via channel financing guarantees that businesses obtain cash against their inventory immediately upon sale while offering customers credit facility to repay their financiers once the stock has been liquidated, resulting in increased liquidity along the whole supply chain. With such access to funds, every stakeholder can run their operations smoothly and perform at their optimal best, ensuring an uninterrupted supply chain.
Improvements in Working Capital: Channel financing aids in the reduction of any gaps in a company’s working capital and also improve the efficient utilization of funds. Corporates can use accelerated collections to put their funds in higher-yielding investments, which can be then reinvested back into the business. Even insignificant amounts across transactions can help treasurers lower the stress during a crisis.
Preparedness for policy reforms: As the economy has been undergoing tremendous turmoil since the pandemic, it is likely that the government will keep trying to implement improvement reforms to boost demand for the revival of the economy. Businesses will do well to prepare themselves to take giant leaps forward and be aggressive during such anticipated demand spikes, by making sure they have streamlined their cash flow management. Channel financing will help various companies, as well as their customers, easily access some extra funds that could meet any additional demands and even augment growth in their revenues. Firms may also want to seek funds through invoice financing whereby they can get small advances on the basis of any dues from their existing customers.
Decreased bad debts: Bad debts are always a concern for every business, particularly during uncertain times. Having working capital available will increase cash flow resources and even decrease the risk of bad debts. Non-payment risk is properly appraised by reputable lenders when a channel financing scheme is established. Financers alleviate the load for businesses, of evaluating the risk of giving credit to supply chain partners. Firms can use channel financing to lower default risks and obtain information about their client’s financial status for future projects. Businesses may also want to explore the option of invoice financing, to improve their working capital health.
Quick funds: In these ever-so-dynamic times, time is critical to any and every business. While trying to gather working capital, channel financing is a quick and simple means to obtain some advances, when compared to a regular business loan offered by banks or other financial institutions.
Cashflow distress puts a company’s survival in jeopardy. Therefore, optimizing liquidity is key for the health of a business’s financial status, its credibility, and even its future growth prospects. In unpredictable times, businesses that foresee their firm’s long-term demands must use facilities like channel finance to unlock funds and establish stronger supply chain partnerships.
To maintain the cash flow of your business, you can also avail of collateral-free business loans from Bajaj Finserv and get financing of up to Rs.45 lakh. To make the loan availing process simpler, this NBFC offers personalized deals on its products such as business loan, personal loan and home loan that comes pre-approved. You can check your pre-approved offer by simply sharing your name and contact details.
When it comes to steady cash flows, almost every industry has faced challenges during the recent worldwide pandemic. To face this kind of challenge, and to come out strong, it’s important that businesses focus on improving their working capital. One of the significant ways in which cash flows can be optimized is through the facility of channel financing.
When compared to standard business advances offered by financial institutions or banks, channel financing tends to be a much faster means of procuring funds. Most reputed banks and financiers have made channel financing for businesses a simple digitized process so that their road to accessing capital is seamless and transparent.