Often channel companies with high levels of technical expertise are unable to realize the full potential of their capabilities due to lack of proper working capital. Smart financing can help them to grab new opportunities and manage the huge business growth happening today. It is said that the key to sustaining the high growth momentum is to manage good cash flows. Several channel partners sacrifice business opportunities due to working capital constraints. Channel financing can helps tackle this loss of opportunities. Finance options allow more transactions within a single credit cycle, helping the company grow faster. Moreover, it helps companies to move from a hardware-centric to a solutions-driven business and take on larger and complex deals.

Companies for which a large chunk of our business comes from the government, where accounts receivable days are higher, they have to predict about their cash flows very carefully before bidding for such projects. With many companies moving up the value chain to increase their solutions and services play, managing cash flows has become imperative. When an organisation moves from corporate reselling to solution provision and as deal size gets bigger and more complex, availing financing options has become the need of the hour for many solution providers. Channel Finance has helped the several companies to get aggressive in taking bigger credit exposures, a requirement for bagging large projects. It has also enhanced their ability to service more deals.

Distributors too are aware of the need for channel financing and have introduced various programs to enable their key partners with tools to avail more financing options. In a recent study, those companies that avail channel financing have grown at a faster pace than those that don’t. Initially there was great difficulty in convincing corporates to use the option. But in the last two years over 150 companies have started using this scheme. At present banks prefer larger companies with proper balance sheets for bill discounting. Smaller companies are usually not given priority and have to pay higher interest rates. For such smaller companies NBFC’s and other financial institutions offer a variety of solutions or lower interest rates.

Vendors too are doing their bit to help channels manage their internal finances better as well as empower them with customer financing schemes. Also with the integration of the Indian economy, most of the export payments are usually done through factors.