Here is how Indian companies – especially small businesses and startups – can overcome cash flow hiccups and other capital-related nightmares.
A lot of very successful and cash flow-efficient companies of all sizes have faced capital shortages and cash flow obstacles since the onset of the Coronavirus pandemic. Cash flow reserves across the board have been drained by slow demand that stemmed from the pandemic and staggered lockdowns.
New normal, new challenges
With a dip in the number of Covid cases in the country, there is a general positive sentiment seen as demand and supply returns to the market, and we return to normalcy. However, this is a new-normal – many companies are still left with one big challenge: How can they grab hold of, and deliver on long-awaited business deals coming their way when their cash flow reserves have been severely dented or depleted?
The extent of the capital gap is unique to each business. Some companies are fortunate enough to have sufficient reserves to deliver on the orders coming their way, but might not be able to sustain the 45 to 90-day payment cycles as they did in the past. Some companies might be able, but unwilling, to offer extended payment cycles because of the continued air of uncertainty. Some other companies might genuinely not have the financial resources to obtain raw materials that they need to obtain business or execute on received or potential orders.
But there’s no need for a company in any of these situations to lose hope or to wring their hands helplessly. Instead, a business can reap the benefits of supply chain financing which is designed precisely for situations like the one we find ourselves in.
Supply chain financing is available in a number of options and you can choose the one that best suits your unique requirement.
How supply chain financing works
In supply chain financing, a company – known as the anchor – will rope in a financier to pay its debts to vendors, against payments owed to it or assets it owns. It promises to pay the financier back within a certain time period, along with a small amount of interest. The anchor may alternatively have the financier pay the vendor’s debts, with the same promise that the financier will be repaid by the vendor, within a certain time period, with a small amount of interest.
Receivable finance as a viable solution
Your trade receivable or accounts receivable balance is an asset, and it is one that can be used to alleviate the cash flow obstacles that you might have at hand. This includes your income tax refunds or interest, dividends and payouts from any investment or insurance that your company might have, cashback and any income that comes from any source other than the sale of your goods or services.
You can obtain capital to pay your vendors from YubiFlow based on payments owed to you – these payments can be coming to you from clients or any other source, as discussed earlier.
All you need to do is enroll yourself on YubiFlow – the onboarding is the smoothest in the industry and possibly the shortest too!
Show YubiFlow your trades receivable and display your financing requirement to a large pool of quality and accredited financiers faster than ever. The tech-forward platform enables you to instantly review expressions of interest from multiple sources right from your dashboard, and take it forward for execution seamlessly. Documentation is also immaculate on the YubiFlow where we do the due diligence for you – display credentials of the financiers, the past deals they have funded, and all other relevant data you may require to hasten the funding process.
You can imagine the amount of time this saves you – your finance team, your business team, your legal team and of course, the management.
Your vendor payments may be settled directly, as per a predetermined limit you may discuss with your chosen financier.
In this way, you will be able to continue receiving the raw materials you need to continue delivering the standard of goods/ service that keeps your clients satisfied and loyal.
Companies also have the option to ‘sell’ their invoices and let YubiFlow collect payments for you. This is known as factoring or trades receivable discounting, or invoice discounting.
At YubiFlow, you can find exactly the supply chain funding solution that suits your unique capital requirements SOPs and company policy.
To aid IT companies start work from office effectively and smoothly, we have launched an Rs. 100 Crore Supply Chain Finance program for them. Watch the video to know more about the program👇🏽
Alternatively, help your vendors get funding
What if your suppliers are calling for a rationalised payment cycle, but your company SOPs and policy do not allow for external funding or credit? You can’t blame your vendors, given the business environment. Even if you choose to risk raw material quality by searching for new vendors, you might be hard-pressed to find companies that are able to sustain longer payment cycles in this economic scenario.
Thankfully, YubiFlow has a solution that could work. Companies could enable vendors to obtain financing, so that the vendors can deliver raw materials to them before, without having to shorten the payment cycle. The supply chain finance company pays the vendor when the invoice is raised, or upon delivery of the product to the anchor company – that’s you – you pay the financier according to the agreed terms.
At YubiFlow, you can sign your vendors up for a variety of supply chain finance products, such as:
- Sales invoice discounting
- Sales billing discounting
- Purchase order financing
Why opt for supply chain financing?
Besides offering you a world of opportunity, supply chain financing is popular because it is far less costly and also easier to obtain than a loan. Getting a business loan can often be a time-consuming process and you need to put up substantial collateral in most cases. In contrast, supply chain finance allows you to gain capital access quickly, cost-effectively and without undue stress.