Channel Financing: Meaning, Advantages, Eligibility & Documents Required

The supply chain is an ecosystem with several components highly dependent on each other. That means if a single piece of the complex equation compromises ability, it directly impacts the final experience for the consumers. Therefore, suppliers seek channel financing to support their financial stability. It is an excellent funding option to maintain business cash flow and stock up the working capital. Furthermore, it is quick and offers multiple benefits. Read on to understand the meaning of channel finance in detail.

What Is Channel Financing?

Channel financing is an innovative business finance facility that supports the working capital requirements of different channel partners, including buyers, distributors, and dealers. Bill discounts and cash credit are the most common ways of extending this financial support, allowing you to bring your credit cycle to zero with upfront access to money. You may also access this facility to get short-term instant Business Loans based on your business cycle. Therefore, it is an effective method of strengthening your supply chain management.

How Does Channel Finance Facility Work?

A channel financing program has an established structure built between lending institutions like Hero FinCorp and stakeholders in the supply chain. For instance, if you are a supplier, you first raise an invoice when providing products or services and send a copy to the financier. Once the buyer accepts the invoice, you get funds in exchange. Later, the finance provider recovers this money from the buyer after the invoice maturity. As an SME owner, you can benefit from financing channels in multiple ways. For instance, if a client requires your raw materials in bulk quantities, you don't need to reject the order due to a lack of funds. Instead, business loans without collateral provide easy money to fulfil the order without pressurising your liquidity.

Features of Channel Finance 

Channel Finance has several notable features that include the following:

• Quick Approval: Financing channels involve easy loan application procedures. If the details are accurate and the documents are clear, you may get the required funding in just a few hours.
• Unsecured Access to Working Capital: If you fulfil the lender’s eligibility conditions, you can obtain the desired loan without collateral or a guarantor.
• Convenient Account Management: Since many Non-Banking Finance Companies (NBFCs) offer channel finance facilities online, you can operate and manage your account conveniently from any device, anywhere.
• Flexible Repayment: Repayment flexibility ensures smooth repayment without stressing your budget. Using an EMI calculator, you can choose a short or longer repayment period according to your business revenue. 

Advantages of Channel Financing

Channel finance is a structured program you can utilise to boost your supply chain efficiency. If you can find a suitable channel finance provider, you can enjoy the following advantages:

• Collateral-Free Finance

The best thing about channel financing is that you don't need to worry about providing collateral against an instant Business Loan. The finance provider offers funds against an unpaid invoice, making the funding process simple and fast.

• Quick Repayment Process

As a supplier, you can receive immediate finance. For repayment, the finance provider directly connects with the buyer or the Point of Sale (PoS) to accelerate the process. 

• Improved Work Efficiency

As the financial institution provides the required funding to handle a large order, you can focus on higher-value tasks rather than chasing behind payments, follow-ups, and verifications.

• Easy Process

The channel finance execution process is relatively easy. The process is straightforward, and documentation requirements are minimal, allowing you to access the required capital quickly.

• Enhanced Liquidity

As the lender receives the payment on time, there is no chance of bad debt. Finally, it boosts your business productivity and efficiency.

• Less Recovery Risk:

The biggest hassle for you must be a bad debt expense. The risk of not getting the sale money reduces significantly through financial channels, as the financier takes the responsibility of collecting the payment from the buyer. In comparison, you receive your payment upfront.

• Fast Payment

With this facility, you can get your payment within a short period after invoice maturity. Some finance providers integrate the finance option directly with the sale system, speeding up the funding process and streamlining the repayment.

• Easy Access to Working Capital

If you have recently started your business operations, a common problem you may face is not building enough working capital to fund growth plans. With the help of Business Loans without collateral, you can get timely funds to meet your day-to-day requirements and work towards expanding the business.

• Smooth Cash Flow

You can use channel finance to meet your working capital needs, stock up inventory, or serve any other purpose as the need arises. Consequently, it ensures smooth cash flow and reduces the burden on it.

Eligibility Criteria

Micro, Small, and Medium Enterprises (MSMEs) can obtain channel financing if they meet the following eligibility criteria:

• You must be a wholesaler, manufacturer, sole proprietor, retailer, distributor, trader, or Business to Business (B2B) service provider established as an LLP, private limited company, partnership firm, or trust.
• Self-employed professionals like chartered accountants, architects, doctors, and company secretaries are also eligible.
• You must be an Indian citizen between 21 and 65.
• You must have a business experience of at least five years as an SME.

Documents Required

You must submit the following documents to seek an instant Business Loan:

• KYC documents
• Proof of business existence
• Business address proof
• Income proof, including latest audited financials, last six months’ bank statements, GST returns, list of shareholding patterns or directors if applicable

The Impact of Channel Financing on Supply Chain

With channel financing, suppliers and buyers communicate their finances while working with a financial institution. It enhances the cash flow positively and improves liquidity, necessitates invoice payments, and defines payment timings for the stakeholders. If you are looking for a channel finance facility from the right institution, Hero FinCorp is a reliable lending marketplace determined to enable solutions with Business Loans without collateral. Get in touch today and know your options!

Documents Required for Channel Financing

To avail of the channel financing facility, a business owner needs to provide a set of documents, and these documents are  - 

• ITR for the last year - a business owner needs to provide the Income Tax Return for the previous year.
• House and Business address proofs - Valid address proofs for the business, as well as the house, also need to be provided
• PAN Card - A business owner must also provide details of his Permanent Account Number (PAN) to get channel financing.
• Bank statement  - A statement from the bank having the business account for the previous 9 months is also required. 
• Aadhaar Card - A valid Aadhaar card also needs to be part of the documentation.   

How can one apply for Channel Financing?

You can apply for channel financing at Hero FinCorp by following these steps.

• Visit our website (https://www.herofincorp.com/)
• Select the ‘Apply for Business Loan option’
• You can check your eligibility and the EMIs using the EMI calculator available
• Pick the appropriate choice from the options available
• Click on ‘Apply Now’ and fill in all the required details

Our representatives will get in touch with you to take the process forward 

Conclusion

Channel financing is one of the most important facilities that a business, especially a small business, needs to have at its disposal. This instant business loan helps a business cover its working capital and day-to-day cash requirements. With Hero FinCorp, you can apply for it easily and have quick access to collateral-free finance at flexible terms. It can help a business flourish and operate at its optimum.