Channel Financing

  • Channel Financing is an innovative product to extend working capital finance to dealers having business relationships with large companies in India.
  • This may be in the form of either cash credit facilities or as a bill discounting line of credit.
  • Thus in channel financing, the financing bank takes care not only of the corporate manufacturers but also his supplier and the dealer/distributor.
  • Here this is pertinent to note that in case, the supplier or the distributor of the goods to the corporate is competent to arrange their own funds for total requirement, then there is no need for channel financing product.
  • Therefore, this product of financing arises only when the supplier or the distributor is not in a position to meet its requirement of funds from their own sources for from their own bank due to any reasons and the corporate manufactures wants to help him so that he may get the seamless supply and seamless realization of book receivables from the distributors/dealer.
  • Products under Channel finance: Banks provide different types of products under channel financing depending on the requirement of the business enterprise specifically these are overdraft/ cash credit or usance bill discounting.

1. VENDOR FINANCE:

Channel financing is made through discounting of bills drawn by the vendor/ supplier of goods and accepted by the corporate. Banks provides bill or invoice discounting facilities to the channel Partners (Vendors/ suppliers) of large companies for making payment on behalf of corporate to the vendors or the suppliers for the goods supplied by them.

 2. DEALER FINANCE:

Channel financing is made through discounting of bills drawn by the corporate and accepted by the channel partner i.e. dealer/distributor by the banks. Banks also provides overdraft facility to the channel partners who have business dealings with the large corporate.

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