Colorlines Clothing India Private Limited
‘Supply chain financing is the best form which is in addition to other forms of financing’
Ready-made garment manufacturers
How do companies into supply chain financing obtain their funds?
In my view, supply chain financing is the best form which is in addition to other forms of financing. Suppliers who are most attracted to this are typically, although not exclusively, those with a lower credit rating and therefore have a more constrained access to credit.
Companies mostly depend on working capital from banks and other financial institutions. However in supply chain financing it does not require a bank, i.e. once invoices are approved by buyers by paying a marginal fees, suppliers can get early payment of invoices from lenders.
Such loans are available only to the extent of drawing power from banks which is computed as per banking norms.
Lenders usually ask for collaterals equal to loan amount which should be free from any other charge which has become one of the hurdles in obtaining funds. Such collaterals are mostly personal properties of promoters. We have to comply with various requirements of bankers such as submission of monthly stock statement, financial follow up report, etc.
We had limitations in bank limits and were in need of additional line of funding to process their orders. After entering into financial arrangement with RTS, we were able to improve our liquidity by way of discounting our invoices immediately after shipment instead of waiting till maturity date and getting payment on maturity.
We have more visibility into our supply chain cycle and we know when we are getting payment from our buyers and access to financing can be much easier now.
Published on: 21/10/2014
DISCLAIMER: All views and opinions expressed in this column are solely of the interviewee, and they do not reflect in any way the opinion of Fibre2Fashion.com.