Use Case
Channel Financing in Electronics Manufacturing
Enable seamless access to working capital for all partners in the system, empowering their financial capabilities.
Supercharge business growth with channel financing.
It accelerates the cash flow for businesses and offers credit flexibility to distributors, partners, and retailers.
Background
It is a globally renowned company and part of India's leading business conglomerate. With a diverse business portfolio that encompasses consumer products, lighting solutions, and power transmission equipment, the anchor company has consistently maintained a prominent leadership position in the highly competitive consumer electronics industry.
Despite its robust market presence and reputation for delivering top-tier products, the anchor company encountered a common challenge — the timely realization of a substantial amount of receivables from a vast network of distributors and institutional buyers. This challenge underscored the importance of optimizing its financial processes to ensure the efficient management of accounts receivable and bolster overall financial stability.
Despite its robust market presence and reputation for delivering top-tier products, the anchor company encountered a common challenge — the timely realization of a substantial amount of receivables from a vast network of distributors and institutional buyers. This challenge underscored the importance of optimizing its financial processes to ensure the efficient management of accounts receivable and bolster overall financial stability.
Challenge
Anchor company faced challenges in realizing large amounts of receivables from a pool of dealers/institutional buyers, which posed significant financial hurdles. Buyers' working capital constraints often resulted in extended payment timelines, affecting the company's cash flow.
Buyers were often reluctant to bear financing costs or take financial recourse upon themselves, further complicating the receivables management process for the anchor company.
Buyers were often reluctant to bear financing costs or take financial recourse upon themselves, further complicating the receivables management process for the anchor company.
Approach
CI devised a strategic solution that entailed the assignment of receivables to a Non-Banking Financial Company (NBFC), streamlining financial operations. By transferring the rights to future payments from buyers to the NBFC, the anchor company ensured a steady and expedited cash flow. The assignment of receivables introduced a crucial element of security, eliminating recourse for both the anchor company and the buyers.
To alleviate buyers' working capital constraints, extended credit terms were thoughtfully provided, enhancing their financial flexibility. Through the collateralization of the receivables transaction, the cost of financing remained considerably low when compared to alternative structures such as invoice discounting. This cost-effective approach was instrumental in achieving financial efficiency.
To alleviate buyers' working capital constraints, extended credit terms were thoughtfully provided, enhancing their financial flexibility. Through the collateralization of the receivables transaction, the cost of financing remained considerably low when compared to alternative structures such as invoice discounting. This cost-effective approach was instrumental in achieving financial efficiency.
Result
- TradEasy enhanced the anchor company's cashflow, addressing immediate financial needs.
- Extended credit terms preserved buyers' working capital, reducing financial strain.
- Collateralizing receivables ensured economical financing compared to traditional methods.
- Buyers gained the flexibility to extend credit terms for improved payment management.
- TradEasy's solution benefited both anchor companies and buyers, optimizing cashflow.
