How digitised Supply Chain Financing can ease access to capital: Surajit Das, Yubi Flow

Surajit Das, Chief Business Officer, Yubi Flow recently spoke to Dataquest about the impact that digitised supply chain financing can create on the manufacturing and IT sectors in improving access to capital for channel partners and vendors. Excerpts from the interview:

DQ: How can vendors and dealers leverage supply chain financing for business growth?

Surajit Das: Every day, businesses rely on working capital to support their daily operations. While suppliers want to get funds as quickly as they sell, buyers prefer longer credit periods to ensure that inventory are sold out so that there is no stockpile. Suppliers also use these cash to prepare for future growth and to weather economic storms.

Supply chain finance (SCF) offers a two-in-one solution: short-term loans to support firms' supply chain activities, making SCF an investable and trustworthy asset class for lenders and financiers. 

In other words, supply chain finance can help stabilise and improve the flexibility of supply chains by providing the lowest cost of capital to where it is needed most. This shift in focus can help businesses improve efficiency, innovate, and invest in new products rather than simply trying to survive. 

DQ: How are you solving working capital problems for MSMEs?

Surajit Das: Let me explain this with the example of Supertron - one of the leading Indian companies in IT product distribution and services that owns the national distribution rights of global brands like Seagate, Acer, DELL, Lenovo, Sapphire and Zotac, among others. They typically have high working capital requirements and need bank limits to finance the inventory holding period. All these reasons make the business working capital intensive. Similarly, for Supertron’s dealers, availing working capital credit at lower pricing for an extended period is crucial to run their business smoothly. 

Our SCF offering, Yubi Flow is a fully integrated and easy-to-use supply chain finance platform that offers trade financing solutions to lenders and corporates to strengthen their channel partner ecosystem. Additionally, MSMEs are offered competitive rates which are tailored to business’ specific requirements. SMEs and businesses of any credit rating can avail of SCF facilities at Yubi. This further enables partners from rural areas to fulfil their working capital requirements.

In Supertron’s case, we provided a channel financing facility which became instrumental to both Supertron and its dealers. On one hand, the channel partners were provided with unsecured working capital lines to discount Supertron’s invoices and take extended credit period at lower rates of interest. On the other hand, Supertron's receivables were directly financed by NBFCs, reducing the risk of recovery. Vivriti Capital sanctioned a total limit for Supertron's dealers at ₹39 Crores which were leveraged by 16 dealers at a time when they were facing capital constraints.

DQ: How SCF can significantly increase financing efficiency while lowering expenses and reducing risk?

Surajit Das: Supply Chain Finance does not always need collateral, and most banks provide it. However, the time it takes to get the funds ranges from 15 to 30 days, and in certain cases, much longer. Due diligence and other processes lengthen the time it takes to obtain the necessary financial backing, particularly in tier 2 and tier 3 markets, making quick access to capital more difficult.

Through Yubi Flow, these distribution partners can rapidly and easily leverage the promise of SCF. We aid in the discovery of potential borrowers and lenders for SCF and support the entire process digitally by providing necessary data and information for prompt disbursements of required funds. Distributors/Suppliers benefit from timely financing leading to business continuity and expansion. 

DQ: Future outlook of the segment

Surajit Das: It is expected that supply chain finance will transform the supply chain industry. For banks and institutional investors, this type of financing offers a low-risk investment opportunity with an uncorrelated yield. Investing through tech-enabled supply chain financing can help businesses grow sustainably. 

While there is still more work to be done in the supply chain finance field, and full adoption will take time, the solutions offered by FinTech enterprises are assisting small businesses and those in rural regions where traditional lending and banks' reach are restricted. Yubi is one such FinTech company that assists potential entrepreneurs in achieving their aspirations and contributing to the growth of the economy by connecting them to suitable lenders while also undertaking digital underwriting, KYC, and other functions. By leveraging the capabilities of AI and data analysis, we are digitising the finance sector to bridge a portion of the supply chain finance credit gap.