The banking cycle of the Indian economy is evolving day by day. One can see various small and medium enterprises that are starting for credit. Problems somehow remain unreserved to a greater extent.
Due to this reason, the supply chain finance of India came into existence. There is a need for credit and liquidity in the economy to support the sudden shocks. The only solution for such a difficult situation could be supply chain finance. The supply chain finance sector receives the deserving attention during the present situation. When India looks forward to building a better economy, the small and medium enterprises get affordable and seamless credit with the help of channel financing. Let’s look at the five reasons the supply chain becomes important in thriving situations.
- Bringing the capital to the demand
To bridge the gap between the investor and the originator, the process helps meet the demands of the required supplies. Hence walking with the large companies to fund the ecosystem of suppliers and customers would increase the depth of the anchors. On the other hand, the firms focus on increasing the lender base, including various investors. Some of these investors include banks, multiple non-banking financial corporations, and small finance banks.
- Solving any roadblocks to supply
With channel financing, there would be enough awareness of demand, management, and supply maintenance. While all the companies are looking to diversify the investors, including foreign banks, non-banking financial corporations and small and medium financial institutions, an investor can take up the supply chain finance assets into the capital market.
- Innovating for credit infrastructure
Lenders need to work with invoices, bank statements, cash flows, and more data. This data needs to be organized so that lenders can come to quick and sound decisions in any situation. Anchor LED programs can help these lenders make decisions as one of the counterparties would be a large corporation. The financing transaction would be transparent due to the counterparts.
- Investing in technology
With the covid-19 pandemic situation, amplification for the needs of supply chain organizations came to the surface. These organizations are looking for the right tool that would help to make informed and better decisions. Due to this reason, the leading supply chain organizations use artificial intelligence and advanced analytics to dig through the past amount of data they generate. It also provides them with insights into the actions taking place in the business.
- Going digital
There are various stages of onboarding small and medium enterprises for finance. The digitization of KYC documentation to get the finance reduces the friction at every step. Companies must accommodate the end-to-end digital encryption on the given platform to help the corporate onboarding within 24 hours. This process helps expand the access of credits to the lower tier of customers and suppliers. But one must look for end-to-end digitization that offers a hassle-free and seamless experience to the borrowers and lenders.
The huge value in the supply chain financing results in a 50% drop in the working capital cost.
Therefore, the initiator of these other large companies results in the growth of net sales. Implementing channel financing in the economy benefits all medium and small enterprises. But if the large companies do not take hold of this, it raises the financing cost so that the entire system cripples down.
