Can Supply Chain Financing be the solution to companies struggling with COVID-19 consequences?

The Coronavirus outbreak has caused widespread disruption to global trade. As per a survey conducted by the Institute for Supply Chain Management, nearly 75 percent of companies face supply chain disruptions within just 6 months of COVID-19

The consequences of business disruption and extended lockdowns have led to an acute financial crunch right down to the lowest levels of supply chains, affecting the small-scale businesses and retailers the most. These small businesses were already vulnerable, with low cash reserves and fluctuating cash flows. With the pandemic, their troubles have significantly multiplied with consistently dipping revenues leaving entrepreneurs struggling to stay afloat.

SCF can be an effective means to inject much-needed liquidity and improve cash flows in these trying times. A supply chain finance program is a collaborative process where the lender comes into an arrangement with corporates and their supply chain partners to aid them with real-time access to capital at competitive interest rates. Through such partnerships, both buyers and sellers can optimize working capital and benefit from unlocking the working capital trapped within the supply chains.

Here’s our take on how SCF can help companies navigate the Covid19 crisis:

  1. Stabilizing operations with easy access to capital:
    As businesses are coping with financial distress, SCF can be the solution to provide them with real-time liquidity that can be used to fund day-to-day operations. Such financing can provide hassle-free working capital financing to keep their assembly lines running without interruptions.

Besides adding to the smoother operations, SCF finances the immediate inventory need of businesses without straining on their cash reserves or sacrificing the ability to keep up with the competition.

  1. Focus on growing the business:
    With extending lockdowns, businesses turn to technology to optimize the bandwidth of their resources and empower them to work seamlessly virtually. Supply chain financing with new-age fin-tech platforms like Mintifi, can help save time and redundant manual efforts in raising invoices and managing settlements and reconciliations.

SCF also saves time and effort of sales teams following up for payments manually. This ensures that the sales representatives have more time on their hands to focus on their core function, growing the business.

  1. Seamless onboarding:
    SCF today with lenders like Mintifi, can be accessed in no time with minimal documentation. When there are restrictions on mobility, physical collection, and verification of documents to apply for bank loans can be tedious, not to mention a risk to your employees’ health and safety. With Mintifi platform, your partners can quickly upload select documents at their homes’ convenience and safety, ensuring seamless onboarding and access to finance.

With an end-to-end digital onboarding process, SCF helps in accelerating lending as the dealers can now make payments within 24-48 hours of uploading invoices online.

  1. The flexibility of an additional line of credit:
    As an additional credit line, SCF provides distributors access to funds they would otherwise have to source from bank loans, equity funding, or by mortgaging property and straining their cash reserves.

SCF offers unsecured financing at competitive interest rates, facilitating small businesses to continue running their business smoothly without requiring upfront capital. SCF also provides them with more manageable repayment terms depending on their cash flows, unlike conventional borrowing.

  1. De-risk supply chains:
    The Covid-19 impact on many firms’ supply chain, both physical and financial. While businesses have started identifying alternative local suppliers to reduce dependency and diversify risk geographically in times of crisis, SCF can be a solution to stabilize financial supply chains. SCF can be the fuel that keeps all engines across the supply chain ecosystem running to navigate the current crisis and build resilience.

SCF is an effective means to fund businesses with easy access to capital to strengthen business operations and continuity. A recent survey with PWC stated that “79% of companies with high-performing supply chains achieve revenue growth greater than the average within their industries”. SCF could be a great way to build resilience in supply chains as companies partner with their ecosystem to grow together and mitigate the current crisis.

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