2016 self liquidating fund asp id
The company realises its sales proceeds immediately and the operating funds so unlocked, can be deployed to fuel business growth. However, with CFS, the dealer can get credit from the bank with limited documentation and more importantly, without any collateral security.
The additional benefit of this scheme is that it leads to improvements in financial ratios, and greater efficiencies in receivables and cash management processes. He therefore benefits on account of a steady availability of cheaper working capital.
Implementing the scheme in the business It is usually not easy, however, to implement CFS within an organisation and its channel partners. Today, the system is running smoothly, giving Havells all the benefits it had promised.
Initially, everyone is reluctant to give up the traditional way of doing business.
It has also instilled greater payment discipline among its channel partners.
The dealer can also achieve savings by repaying the bank before the due date, by streamlining his collection and recovery process.
Benefits to the bank The bank also gains substantially from the process in terms of an increased customer base and a diversified risk profile.
Because CFS can benefit SMEs, just as micro-finance benefits individuals, it may be termed 'Commercial Micro Finance'. The channel financing process starts with negotiations between the company (principal) and the bank.
A credit limit is then set by the banker for each approved dealer.