Channel financing is a pioneering idea for offering dealers, who have business relationship with big commercial entities, the capital finance. It is a process through which the banks or any other financial institutions address the capital related necessities along the supply line. It helps the suppliers to keep an incessant business flow and it also ensures that the business capital does not run dry. The benefits of channel financing are so multi-faceted that everyone within the supply chain has embraced this unique solution. The big companies, to ensure the smooth run of business, have also extended their help to accommodate the suppliers and the sellers to obtain channel finance.
Channel Financing- Benefits
1. It offers working capital finance to the channel partners at a lower rate than the current credit cost.
2. Channel finance can be used by the corporate as a strong marketing tool. It can help them in building a better bonding with the channel partners.
3. It can develop the financial results by releasing the funds from the balance sheet.
4. It will enable the channel partners with increased purchasing powers which is turn will increase the sales.
5. The channel partners will get working capitals at cheaper rate and in a steady flow.
6. One can receive numerous facilities up to a certain level.
7. The processing is easy and less documentation is needed.
8. Corporates can offer cash discounts which will definitely get reflected in the increased profitability of the dealers or distributors.
Channel Financing- Differences with Conventional Financing
In conventional lending, the bank or the financial institutions is not always concerned about the source of capital the suppliers or the dealers of big firms have; whereas, in channel financing the finance company considers the whole chain of process before sanctioning the loan amount.
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