Role of Supply Chain Finance for MSME in India
Table of Contents
Role of Supply Chain Finance for MSME
MSME are very important for growth and development of Indian Economy. More than eighty percent of MSME in India takes place over bank credit and taking funding from informal or private sources at extra cost.
Various limits of challenges by banks from expanding funding to small businesses.
- High risk of non-payment.
- Need for deficiency on the data of business performance.
- Shortage of consistent financial reports.
- Hassle in the measuring of risk properly
Making of MSME credit via supply chain finance
MSMEs in India plays an important role for providing jobs in corporation, they must try to opt for easy acquisition to finance. In india, accounting for MSME is an important share of GDP contribution and employment. When it comes to credit risk owning to the shortfall in the availability of repayment trend data, historical cash flow banks face difficulty.
Supply chain finance is a type of loan when the payment is procured earlier as compare to the invoice of extensive user.
Merits of supply chain Finance
As far as buyers are concerned: –
buyers want to increase their DPO (days increasing outstanding) .
- Enhance the position of Working Capital
- It is the easiest way to procure the finance of working capital
- Has the benefit of negotiation
- Build up the relationship of the suppliers
- Maintain supply chain
- Support for the growth of the business
- Upgrade credit rating
- Initiate the effects of credit cash
- Expand liquidity
As far as suppliers are concerned:
Supplier can benefit from this through improvement of day sales outstanding gain financing for low cost.
- Make accessible settlement
- Decrease existing bills.
- Acquire an easy-to-use and understand platform.
- Reduce the cost of financing
- Assist in better financing rates
- Has the benefits of Working Capital
What are interest rate for Supply Chain Finance
| Rate of interest | @9.00% onwards |
| Loan amount | Up to Rs. 2 Crores |
| Processing fee | 1.00% |
What are the Interest rate and processing fees by Banks in India
| Bank name | Interest rate | Processing fee |
| Axis Bank Ltd. | 8.00% | 1% |
| State Bank of India | 7.80% | 1% |
| IndusInd Bank | 10.00% | 1% |
| ICICI Bank Ltd. | 9.00% | 1% |
| Bank of Baroda | 9.00% | 1% |
| Kredx | 16.00% | 1% |
| SBI global factors limited | 11.00% | 1% |
| Tata Capital Financial Services Limited | 12.00% | 1% |
| Lending Kart Finance Limited | 18.00% | 1% |
FOLLOWING IS THE TYPE OF SUPPLY CHAIN FINANCE
- Export and Import financing
- Confirmation, safekeeping, and LC checking
- Pre-shipment export shipment
- Import and Export bills
- Export LC advising
- Letter of Credit
- Performance bonds
- Shipping guarantees
ELIGIBILITY CRETERIA FOR SUPPLY CHAIN FINANCE
Eligibility is based on different factors including revenue from operation, age, CIBIL score etc.
- Age can be between 25 to 64 years of age.
- The limit on loan is 50 lakh.
- Public and Private Companies, Proprietary concerns, Private Trusts, Individuals, Limited Liability Partnerships, Partnership firms
- Business must be continued for 3 years minimum.
List of Documents Mandatory For Supply Chain Finance
- 2 Passport sized photographs
- Income Tax Return if the computation of income (if filed) for 3 years.
- 3 months’ salary slips and appointment letter.
- Bank statement of salary account for 1 year.
- Complete property documents with ATS + MAP and Chain.
- Aadhar card and Passport
- PAN Card
- A Cheque for the processing fee.
- Permanent address proof and also needed if rented.
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