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What is supply chain finance?

Supply chain finance is a form of supplier finance in which suppliers can get early payment for their invoices. It is a financial exchange wherein a lender or a third party facilitates financing for the supplier on behalf of the customer. This credit facility helps reduce the risk of supply chain disruption and optimises the flow of working capital for both buyers and sellers. In simple words, a supply chain refers to a series of steps from manufacturing to the distribution of goods to users.

Under this financial solution, the invoices generated by a business are discounted and loans are provided so that a business does not have to wait for bill clearance and can make payments on time. Supply chain finance is set up by the buyer instead of the supplier; therefore, it works more efficiently if the buyer holds a higher credit rating than the seller. It also helps suppliers receive supply chain finance at a lower cost than they can otherwise access.

Supply Chain Finance in India

Bajaj Finserv offers supply chain finance in India to provide sufficient liquidity in the business so that the movement of goods is not blocked due to shortage of funds. Businesses can thus make the most of this funding to streamline their supply chain. This credit facility comes with simple eligibility criteria and minimal documents, make funding more convenient than ever.

Now, take a look at the features and benefits that Bajaj Finserv brings with its supply chain finance.

  • Supply Chain Finance: Features and Benefits

  • mortgage loan

    High-value loans

    Get financing up to Rs.45 lakh from Bajaj Finserv and address all your business’ supply chain needs - right from sourcing and procuring raw materials to managing your logistics.

  • Pre-approved offer

    Bajaj Finserv provides pre-approved loan offers to its existing customers for faster loan processing. Discover your pre-approved offer here and get funds quickly.

  • Collateral-free financing

    Bajaj Finserv offers collateral-free loan options so that you don’t have to pledge any personal or commercial assets, to finance your supply chain.

  • education loan online

    Approval in 24 hours*

    Get your application approved in 24 hours* by providing just 2 documents and finance your supply chain with ease.

  • loan against property emi calculator

    Flexi loan facility

    Withdraw as much you need from the sanctioned limit with our Flexi loan facility and pay interest only on the amount used. Pay interest only EMIs and lower your monthly outgo by up to 45%*.

  • Online account access

    You can access your supply chain finance account online anytime, from anywhere with our customer portal – Experia.

  • How Does Supply Chain Finance Works?

    To know how supply chain finance works; you must first understand the parties involved. Irrespective of the type of financing involved in SCF, it always includes three parties, a buyer, a seller and a financing company. Lenders offer several SCF transactions, which can include the terms of accounts payable, financing inventory, discounting of payables, etc.

    The supply chain finance process thus works in two ways -
    - By connecting financial transactions as they move forward to complete the supply chain.
    - By encouraging or creating buyer-seller collaboration.

    The two methods used to complete these financing transactions are -
    - Discounting of bills, accounts payables, etc.
    - Factoring the purchase of inventory and other items that boost the flow of working capital. It is also known as purchase financing.

    Method 1: Discounting

    In this method, the lender providing supplier finance discounts the invoices generated by the seller and provides funds immediately as a discounted amount. Simultaneously, the buyer receives an extended period for bill payment which the financial institution collects in full on maturity.

    Method 2: Factoring or Purchase Financing

    In this method, a buyer enjoys trade credit from a partner lender providing SCF. The lender also plays the role of an intermediary between the company and the supplier from whom it will purchase raw material. In this arrangement, the company places a purchase order for inventory or any other item with the financial institution, which in turn, collaborates with a supplier to fulfill the order. The company pays the invoice thus raised at net credit terms.

    While this is how supply chain finance works, buyers and sellers can negotiate the SCF terms with their financial institution based on the leverage, i.e., urgency in the requirement for funds that they have.

  • Supply Chain Finance: Eligibility Criteria and Documents Needed

    Get a supply chain finance loan by fulfilling simple eligibility criteria and providing minimal documentation.

  • Supply Chain Finance: Interest Rates and Fees

    Bajaj Finserv offers supply chain loans at low interest rates and nominal fees and charges.

  • Supply Chain Finance: How to Apply

    Apply online for supply chain finance in just 3 easy steps.

Supply Chain Finance FAQs

What is supplier financing and how does it work?

Supplier financing is a great solution for businesses as it helps them to maintain their working capital by paying their suppliers for raw materials and inventory. It comes with a high loan value, at an attractive rate of interest, that is repayable over a flexible tenor.

How to avail of supply chain finance in India?

It is easy to avail of supply chain finance in India as banks and NBFCs offer this financing solution to business owners digitally as well as offline. If you are an existing customer of Bajaj Finserv, you can simply check your pre-approved offer for quick funds. If you do not have a pre-approved offer, you can apply for a loan with minimal documentation, and get the funds you need within 24 hours*.

What is the total market size for supply chain finance in India?

At present, the value of supply chain finance in India is around Rs.60,000 crore. However, this is just 10% of the total addressable market for supply chain financing. The total market is estimated to be around Rs.18 lakh crore based on the value of invoices raised by the suppliers to businesses.

What does supply chain finance do?

With the help of supply chain financing, it is easier for a supplier to raise and get early payment for their invoices. In supply chain financing, the buyer purchases goods and services from the supplier and the supplier issues invoices to the buyer with payment due within a certain duration. Once the buyer approves the invoices, the supplier requests early payment and the lender sends payment to the supplier after deducting a certain amount of fee.

What will be the future of supply chain finance?

A supply chain loan is a popular financing method among small-medium enterprises and is growing across the globe. Backed by technology, supply chain finance programs are focused on providing safe post-shipment financing. However, the emergence of technologies such as artificial intelligence, natural-language processing, and robotic process automation is likely to enhance the efficiency of this financing solution in the future.
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