Benefits of Supply Chain Finance for Buyers and Suppliers

Companies these days have to invest a huge sum of working capital to power their innovations or to manage a business crisis. Financing options for all companies should be profitable and sustain them throughout the year. Today, because of supply chain finance, tail-end supplies and non-investment grade companies are also getting their fair share of funding.So what is supply chain finance, exactly? It is the connecting link between the buyer, seller and the financer. It enables the parties to have a healthy collaboration and conduct their transactions with the utmost transparency.Read on to find out how it is beneficial for all the parties involved.

As mentioned before, supply chain finance lengthens the credit period. This amplifies their Days Payable Outstanding (DPO) and makes their transactions economically sustainable. It has been observed that this trend has significantly increased their productivity as they are less stressed about paying the financing institution back.Buyers are sensitised to the goals, participation and overall satisfaction of the suppliers. They’re also mindful of communicating their needs to their financers about being inclusive of all currencies and business laws.Thus, it enables the buyers to secure their supply chain, boost the working capital, raise the liquidity values, initiate a positive flow of cash and enhance their credit ratings.

The availability of a substantial working capital is essential for the suppliers to fuel their growth and encourage their endeavours at innovation. When they are provided with a payment solution that lets Enterprise Resource Planning (ERP) seamlessly integrate their ideas and create awareness about various financial brownie points, it aids in their organic growth, over time.Suppliers are thus empowered to curtail pending bills, engage in cost-effective financing methods and have flexibility in the decisions they make. They’re also able to benefit from financing rates that would profit them and improve their efficacy.

Supply chain finance is not only a business scheme but also a long-standing relationship of trust and symbiosis between the buyer and the supplier. It is very secure and provides all the parties involved with a smooth and risk-free experience. The supply chain finance benefits aren’t confined to just buyers and sellers, but in due course of time, extend to their customers and the overall financial health of their businesses, as well.

The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.