The investing market's growth is no longer exponential on the mutual fund and equity side of the asset spectrum. Nevertheless, modern asset classes that capitalize on India's underutilized debt market have emerged in the fintech sector.
Industry sources estimate that India's accessible supply chain financing industry has a total market value of about 20 lakh crores or about 70,000 crores. Short-term loans are used to finance the supply chain activities of businesses, making supply chain finance (SCF) a reliable and investable asset class for lenders and investors.
We often discuss how buyers might use supply chain finance to acquire billions in working capital. But what about the suppliers? How can supply chain finance help them navigate the current socioeconomic volatility from their perspective?
Working capital is a resource that businesses regularly use to finance ongoing operations. While buyers prefer lengthier credit terms to ensure that inventory is sold off, so there isn't a pile-up, suppliers want to obtain funds as soon as they sell, while the reverse is true for suppliers. Suppliers use this cash to prepare for growth and in times of turbulence in the economy.
Supply Chain Finance: What Is It?
A collection of technologically based solutions known as supply chain finance (SCF) are used to reduce financing costs and boost company efficiency for buyers and sellers involved in a sales transaction. SCF techniques operate by automating business operations and monitoring the approval and settlement of invoices from start to finish.
By participating in this arrangement, purchasers consent to financing their suppliers' invoices by a bank or other third party, frequently referred to as "factors." In order to maximize working capital and offer liquidity, these financiers extend short-term credit to both suppliers and customers.
With SCF’s particular structure, which exploits the power of the buyer's firm as security for the loan, invoices raised by suppliers to larger clients can be paid more promptly, creating a win-win situation for all parties involved.
Leveraging Supply Chain Finance
Vendors gain a lot from invoice financing solutions since they facilitate cash flow and enable early payment of unpaid bills. Early payments help the seller improve systems and maintain smooth operations. They can continue to work with customers and offer them enough time to pay without going overboard.
It gives buyers a way to allocate their working capital without negatively impacting their cash flow. The buyers can develop and grow their businesses using the operating cash they have freed up.
Supply chain finance solutions from Skyscend even assist MSMEs in managing late payments and meeting seasonal demand. These solutions are designed to protect small businesses through rocky financial times.
By increasing payment process transparency, supply chain finance enables buyers and sellers to better protect themselves against unforeseen financial risks. In addition, it improves relationships in the supply chain and aids in closing the credit gap.
Collaboration Is Essential
Long-term business relationships between the buyer and supplier are necessary for supply chain finance to be successful. Both parties are willing to cooperate and work together because it gives them more time to pay off the debt and keeps the money coming in. In addition, it promotes cooperation and resiliency, which are advantageous to the entire supply chain.
Supply chain finance solutions are the productive financial substitute that lessens an MSME's reliance on unofficial funding sources. Furthermore, the financing processes are becoming easier thanks to technological developments because they are now more streamlined from beginning to conclusion. In addition, real-time access to bills, GST, and e-invoices is available to each party. Such openness aids in the collaboration necessary for such a tie-up.
Businesses, with guidance from a reliable partner like Skyscend, can select from a variety of working capital products that work best for them, whether it be invoice financing, invoice processing, or ap automation. In addition, we provide MSMEs and corporations with a range of supply chain finance options that are tailored to their particular needs.
Conclusion
The demand for supply chain finance is increasing, and Skyscend is reshaping the market with its supply chain finance solutions. In addition to addressing the issue of discoverability in the Supply Chain Finance market, it offers a variety of offerings, improved efficiency, enhanced monitoring, and multiple onboarded lenders, as well as highly secured processing with a blockchain-based verification system and lower acquisition costs. To learn more about these options and to begin your supply chain financing journey, Book a Demo Now.
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