India has made significant strides in improving its logistics infrastructure and supply chain management to compete in the global market. One of the key logistical innovations that India has developed to facilitate trade and commerce is supply chain financing.
Supply chain financing refers to the use of financial instruments and services to help companies in the supply chain access working capital and manage their cash flows effectively. This is particularly important for small and medium-sized enterprises (SMEs) that often face funding challenges and are unable to access traditional forms of financing.
India has introduced various supply chain financing solutions that have helped SMEs in the country overcome their funding challenges and expand their businesses. Let’s take a closer look at some of these solutions:
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Invoice Discounting
Invoice discounting is a financing solution that enables SMEs to get paid faster by selling their outstanding invoices to a third-party financier. This helps improve their cash flow and provides them with the working capital they need to fulfill their orders and grow their businesses.
The Indian government has launched the TReDS (Trade Receivables Discounting System) platform to enable SMEs to discount their invoices easily and at a lower cost. This platform connects SMEs with financiers and allows them to receive early payments against their invoices.
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Supply Chain Finance Programs
Supply chain finance programs are financing solutions that provide working capital to SMEs in the supply chain based on the creditworthiness of the anchor company. The anchor company is usually a large corporate that has a strong credit rating and can negotiate favorable financing terms with its lenders.
The Indian government has launched various supply chain finance programs, such as the Supplier Bill Discounting Portal (SBDP) and the Supply Chain Finance Scheme, to help SMEs in the supply chain access financing at a lower cost and improve their cash flow.
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Digital Lending Platforms
Digital lending platforms are online platforms that connect SMEs with lenders, enabling them to access financing quickly and easily. These platforms use technology to assess the creditworthiness of SMEs and provide them with financing at a lower cost than traditional lenders.
India has seen the emergence of several digital lending platforms, such as Lendingkart, Capital Float, and KredX, that provide SMEs with access to financing without the need for collateral or a long credit history.
Conclusion
Supply chain financing is a critical component of India’s logistical innovations, enabling SMEs to access working capital and grow their businesses. With the launch of various supply chain financing solutions, India has made it easier for SMEs to access financing at a lower cost and improve their cash flow, thereby contributing to the growth of the country’s economy.
By leveraging technology and collaborating with financial institutions, India is on the path to becoming a global leader in supply chain financing, empowering SMEs to compete effectively in the global market.
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