Covid-19 disrupted the workflow of several industries and, it was no different for consumer durable businesses. The pandemic induced lockdowns, and the repressed demand adversely impacted the growth of these businesses.
After the roller-coaster start to the year 2020, followed by a wobbling growth during the festive season, the consumer durable industry is gearing up for sizzling sales this fiscal year. According to recent statistics, the sector is expected to rise to 33% growth in the last quarter of 2021.
Amidst the escalating needs for raw materials to keep up with the demands, hopes are pinned on the continuation of strong demand trends witnessed in the 2020’s second half. This trend is expected to sustain, if not surpass, in 2021.
Additional Read: Why is Channel Finance important for Mid-market OEMs?
The need to finance the increased demand
With the rise in the WFH trend, there’s an increased need for consumer convenience. Although spends on categories like apparel and eating out have taken a backseat, there’s a rise among consumers in upgrading appliances to enhance their lifestyle.
For example, many people are still reluctant to venture into theatres and instead invest in good quality television. The LED TVs and other high-end appliances faced a stock-out situation during the festive season last year.
With the evolving consumer convenience, in-home entertainment, and demand for durable goods like television, refrigerators, and other domestic appliances, sales are only expected to rise in the last quarter, as the financial year 20-21 comes to a close.
Businesses trading in consumer durables are gearing up for a high finish after 2020, and channel financing can provide the much-needed financial aid to support them in making this a reality.
Channel financing is an inventory financing solution provided by certain financial institutions to assist supply chain partners of large corporations. It is a structured program offering funding to distributors and dealers doing business with large corporates to purchase stock from the anchor company and scale their business.
Additional Read: How Can Channel Financing Help You Manage Your Supply Chain Better
How Channel Financing can help businesses in Q4
With revenue taking a hit post-Covid-19 and the anticipated rise in demand in Q4, consumer durables traders find themselves in a unique position. On the one hand, they’ve tapped out of their cash reserves trying to survive the consequences of the pandemic. On the other hand, they see an opportunity for recovery with an increase in demand that small businesses cannot leverage without adequate funds.
However, this dilemma can be solved using channel financing.
Ease of Access
Channel Financing is quick and easy to avail funds to supplement their working capital and expand their reach. Lenders can also provide business loans to fund the short-term business needs of the corporate dealers, along with inventory financing.
By providing timely and guaranteed access to the capital, they can manage operations seamlessly and invest in their growth without jeopardizing the current business.
Competitive Financing Terms
Unlike other working capital loans, channel financing relies on the strength of the supply chain relationships between buyers and sellers. Hence, borrowers can access funds at lower rates of interest, and interest is paid only on the funds utilized in the month.
Also, enterprises can make payments for the inventory purchased after they convert it to cash. Hence, there is a reduced burden on the payment process to the corporate. This can be especially helpful for businesses grappling with cash problems post covid-19 era.
Tata Capital’s Channel finance solutions enable dealers to access funds in a simple, convenient, and digital manner.
Flexible Product Structures
Tata Capital also provides flexible structuring of the product to suit varied industries, enabling more supply chain partners to avail the facility.
Channel finance is an excellent financing alternative that can be leveraged by consumer durable businesses to accelerate their recovery post-Covid-19 era. By planning for adequate access to capital beforehand, supply chain partners can make the most of the anticipated growth in sales in Q4.
Tata Capital Channel Finance has strategic solutions tailored to suit your exclusive business needs. If you are looking to fund your inventory for Q4 with Channel Finance, reach out to our experts to know more about how Tata Capital can assist you in the same.