Strengthen Your Supply Chain with Financing Support from Red Fort Capital
A resilient supply chain with skillful money management is a defining pillar of a successful business. With globalization and sophistication in Industry, these supply chains have become intricate, leading to difficulties in managing the finances that fuel them. Suppliers, distributors, manufacturers, retailers, and consumers contribute to this network. A shortage of capital at any node can disrupt the seamless flow of goods and services. Supply chain financing is designed specifically for businesses in the supply chain industry, and these loans offer the necessary capital to manage working capital requirements.
According to a recent study by the Reserve Bank of India (RBI), NBFCs have extended more than Rs. 1 trillion in loans to MSMEs over the past five years.
What is supply chain financing?
Supply chain financing is generally short-term and provides businesses with the working capital they need to operate their businesses. It is useful for purchasing inventory, paying for raw materials, or covering other operating expenses.
How does supply chain financing work?
There are different structures of supply chain financing. The two most common ways are to provide loans secured by inventory or other assets and to purchase the receivables that will be due in the future for the businesses.
Different types of supply chain financing
Invoice financing / Invoice discounting: This allows businesses to sell their unpaid invoices to a third party, also known as a factoring/discounting agent, in exchange for cash. The agent then collects the payments from the customer on the Invoice.
Asset-based lending: This type of financing is secured by the assets of the business, such as inventory or equipment. The lender typically lends up to a certain percentage of the value of the assets, usually known as loan to value (LTV).
Anchor-down financing: An anchor is a purchaser of products from various suppliers. These are generally large companies. The lender satisfies the payables for the anchor while securing an overall discount on the invoices. The anchor ultimately pays back the lender when invoices are due.
Trade credit: This is the most widespread supply chain financing and doesn’t require a mediator. It is the credit period that a supplier extends to its customers for paying the invoices after it is generated.
Warehouse financing: This type of financing covers the storage costs for finished & raw inventory. The lender provides the capital required to maintain the inventory in warehouses. It is also generally coupled with insurance policies for the products stored inside the discounted warehouse.
Benefits of supply chain financing for businesses
Increased working capital: Supply chain financing can help businesses increase their working capital, which can improve cash flow and operations.
Reduced risk: Supply chain financing ensures a consistent and reliable supply of raw materials while positioning businesses to absorb supply chain shocks.
Improved efficiency: Supply chain financing can help businesses improve their efficiency by reducing the time it takes to get paid from customers.
Increased flexibilities: Supply chain financing can give businesses more flexibility by giving them access to capital when needed.
How do you get started with supply chain financing?
Firstly, finalize the exact requirement and tenure required, and zero down on the product that suits your needs.
Secondly, find a lender that offers supply chain financing.
Thirdly, provide accurate and all the documents required by the lender such as financial statements, credit history, etc.
Lastly, you must help to clarify any doubts that the lenders may have.
Supply chain financing can be a valuable tool for businesses in the supply chain industry. It can help businesses improve their cash flow, reduce risk, and improve efficiency. At Red Fort Capital, we believe every business is unique and hence we provide customized and flexible supply chain loans.
Contact Red Fort Capital today to learn how we can add value to your businesses and help them thrive in difficult times.
About Red Fort Capital
Red Fort Capital is dedicated to empowering Indian MSMEs (Micro, Small, and Medium Enterprises) on their path to business growth through customized business loans. We understand that securing a business loan in India can pose significant challenges, particularly when factors like a less-than-ideal credit score, a relatively short business history, unclear financial records, or variable cash flow come into play.
As a respected Non-Banking Financial Company (NBFC), we take pride in offering a diverse range of secured business loans, spanning from 1 to 10 Crores. What sets us apart is our remarkable ability to disburse funds fast, in just 7 days. Our financial solutions are meticulously designed to cater to a spectrum of needs, including working capital requirements, equipment and machinery purchases, invoice/bill discounting, and last-mile financing, among others.