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Tata Capital > Blog > Circulating Capital Loan > Channel finance to optimize stressed cashflow resources

Circulating Capital Loan

Channel finance to optimize stressed cashflow resources

Channel finance to optimize stressed cashflow resources

Sufficient cashflows are the bedrock to safeguard the survival of a company in times of crisis. 2021 brings a lot of hope and optimism for possible recovery after a taxing year for businesses across industries with immense stress on cash flows due to pandemic induced shutdowns. However, the fourth quarter of the financial year carries its challenges given the unpredictability that has pervaded businesses during the past year. 

The role of channel finance in unlocking working capital for business has never been as crucial. This access to working capital ensures liquidity to meet the short-term needs and is vital for its survival. Channel finance can accelerate receivables and ensure optimal cash flow management in stressed times.  

Here is how Channel Finance can optimize stressed cashflow resources:

1. Smooth cash flows

There must be a steady stream of cash flows across the supply chain to keep the operations running. Due to the pandemic, there has been a ripple effect across industries that have disrupted both physical and financial supply chains. Thus, access to working capital through channel financing facilities ensures that corporates receive cash against inventory immediately on sale while providing customers with credit to repay financiers once the stock is liquidated, thereby offering enhanced liquidity across the supply chain. This access to capital helps each stakeholder to run smooth operations and function at their optimum, and ensure that the supply chain remains uninterrupted. 

Additional Read: How Can Channel Financing Help You Manage Your Supply Chain Better

2. Improved Working Capital

Channel financing helps reduce the working capital gap and optimizes a company’s use of funds. Accelerated collections provide corporates with an opportunity to invest funds in investments that offer higher returns, which can then be reinvested in the business. Even if the sum is marginal across transactions, such arbitrage can help treasurers ease the stress in times of crisis. 

Additional Read: Five ways working capital can work for your business

3. Reducing bad-debts

Bad debts remain a concern for corporates, more so during times of uncertainty. Working capital availability can help augment cash flow resources and reduce the possibility of bad debt. 

By setting up a channel financing program, the risk of non-payment is duly assessed by credible financiers. Financers help ease the corporates’ burden from assessing the risk of extending credit to their supply chain partners. Channel Finance can help corporates reduce the risk of default and gain insights into their customers’ financial strength for future undertakings. 

4. Budget reactions

The forthcoming union budget is set to bring in forward-oriented reforms to revive the economy and boost demand. At this stage, companies must leap ahead and be financially ready to cash-in on the spike in demand anticipated. Channel financing can help companies and their customers access additional funds to meet increased demand and support growth in revenue as the stressful financial year comes to a close. 

5. Speed matters

Time is of the essence in every business and even more so during turbulent times. Channel financing is an excellent means to obtain working capital as it is simpler and faster to receive advances as against standard business loans. 

Moreover, at Tata Capital, we have simplified the Channel Finance application process by digitizing it end-to-end. From application, documentation, underwriting to transacting, every step is simplified, keeping user convenience in mind. The entire process is made transparent and seamless to make the road to access capital in stressful times smoother. With competitive rates and favorable terms and conditions, corporates can efficiently access channel financing and ease the cash flow burden. 

Stressed cashflows question the company’s survival, and it is crucial for financial health, reputation, and future growth possibilities for a company that its liquidity is optimized. Treasures with foresight on the company’s long-term needs must take advantage of facilities like channel financing to unlock capital and strengthen supply chain relationships in uncertain times. Reach out to our trade finance experts to optimize your stressed cashflows. 

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