MSME sectors are the strong pillars of India’s economy, accounting for almost 30% of GDP, 45% of manufacturing output and providing employment opportunities to around 11 crores of the country’s population. Considering the importance of the MSMEs, it is imperative to ensure that these sectors have continuous access to sufficient funding.
With the easy accessibility of supply chain finance options, it has become convenient to mitigate the financial gap for MSMEs, revitalising these sectors and extending towards them the recurrent source of liquidity, thereby accelerating MSME growth in the country.
Know the ways by which supply chain finance is bridging the financial gap for MSMEs
Besides knowing supply chain meaning, business professionals must know how supply chain financing helps MSME sectors survive in this competitive business landscape.
- Access to working capital
Supply chain finance is the effective resource for MSMEs and fast-growing companies, assisting businesses with adequate working capital. The accessibility of considerable funds ensures an uninterrupted flow of cash. Moreover, it helps procure raw materials, maintain adequate inventory levels and helps business professionals expand the horizon of their firms.
- Facilitates timely payment
Supply chain finance facilitates timely payment, streamlining the business operational cycles and bringing efficiency to the entire system. Technology-based supply chain finance extends automated transactions, which have brought coherence to payment and invoice tracking. Moreover, supply chain financing enables buyers to lengthen payment terms.
- Ensure no repayment burden
A credit guarantee scheme and supply chain financing differ significantly in repayment terms. While under credit schemes, business professionals have to repay the fund within the given time, on the other hand, MSME sectors have no repayment pressure under supply chain financing. As this credit facility is extended against invoices, payments are collected from the buyers, keeping buyers and sellers on healthy financial terms.
- Offers an affordable source of fund
Another notable way supply chain financing helps plug financial gaps in MSME sectors is by allowing them access to low-cost financing. Supply chain financing is an affordable means of finance that facilitates robust collaboration between buyers and suppliers. Buyers with credit scores will have the upper hand in receiving better terms.
Though supply chain financing is an effective credit facility, MSME sectors can receive further financial backup by availing of a more extensive credit option like a business loan.
It is one of the most convenient ways of raising funds that ensure the proper functioning of the business that backs business professionals or entrepreneurs to launch their business. Purchase equipment and solve the cash flow issues from the core. However, before proceeding with the credit option, individuals must know about the important checklist before applying for a business loan.
An informed step towards availing business loans will help an individual access a considerable loan amount and meet the working capital, helping businesses carry out day-to-day and short-term operations without any hiccups. In this context, business professionals must know how much working capital a business needs to function properly and survive even during economic fluctuations.
Though a business loan accelerates business growth effectively and ensures positive cash flow, it can prove counterproductive if borrowers are unsure about the business loan mistakes to avoid.
Moreover, business professionals get the added advantage of the exclusive pre-approved offers extended by reputed financial institutions on a wide range of financial products like business loans, personal loans etc. These offers are meant to streamline the loan application process. Intending individuals can check their pre-approved offers by submitting their names and contact details.
To sum up, the supply chain finance option is a boon for MSMEs sectors, helping minimize financing costs and enhancing business efficiency. Supply chain financing capital enhances capital competence of these sectors and is thus considered the best fund raising option.