How Unsecured Credit Lines Can Help Suppliers Meet their Festive Demands
The festive season is a busy period for many businesses. The demand increases for particular items like appliances, automobiles, apparel, and more during the festivals celebrated across the nation. This is an opportune period for companies to boost their profits and grow their business. While the rise in sales is undoubtedly beneficial to the business, satisfying this increased demand can be challenging. That’s because suppliers need ample stock, logistical support, and the need to keep track of invoices. Most importantly, to be able to cater to and match the demands of their customers in this busy period, suppliers need to have the necessary financial resources. An unsecured credit line can be a flexible source of cash flow that helps suppliers make the most of the festive season.
What is an Unsecured Line of Credit?
An unsecured credit line or collateral-free credit allows small or medium-sized businesses to borrow differently than a traditional loan. It lets owners or vendors borrow cash for their business not once but multiple times on a revolving basis. A lender doesn’t approve your application and then transfers the amount of money to you in a lump sum; instead, they offer you the ability to borrow up to a certain amount, also known as the credit limit. Interest only starts getting accumulated once the funds are drawn, and only on the amount that is drawn. The amount paid (minus the interest) by the supplier or business is available to them again for borrowing once they pay back the balance. Essentially, an unsecured line of credit functions similar to a credit card facility. Due to the flexibility and the need for no collateral, it is a great financial source for vendors that experience seasonal fluctuations in demand and generally for businesses looking to improve their working capital.
Why Suppliers need Unsecured Credit Lines for Festive Season
Using unsecured credit lines for festive seasons can offer vendors the flexibility and convenience to meet the influx of demands during the festive period.
1. No Collateral Requirement
In a secured credit line or loan, a vendor would have to pledge their assets as collateral to borrow money from the lender to meet their financial requirements. This is not a feasible method for small or medium-sized businesses as they may not have enough assets to pledge or may not want to risk losing their critical capital assets due to uncertainty in demand. However, in an unsecured credit line, a supplier doesn’t need to risk any asset if they default or delay in their payment obligations. Fluctuations and uncertainty in sales and other expenses during the festive season can vary for different businesses, and risking their assets is not viable. This is why collateral-free credit or unsecured credit lines make a preferred source of finance for suppliers.
When suppliers are faced with a spike in demand, they need to get access to cash in their business quickly to be able to meet growing demand. Unsecured credit lines require minimal documentation, making the approval and amount transfer quick. This source of credit becomes beneficial for vendors in times of festive seasons when there is a need for keeping inventory stocked and readily available for customers as the demand for it soars. They get access to money to cope with the expenses quickly while ensuring that they promptly meet customer demand.
3. Flexibility in Repayment
Generally, lenders of unsecured or collateral-free credit offer flexible repayment and borrowing options to vendors. Keeping up with the due dates of early monthly repayments for secured credit or loans for reasons such as outstanding customer bills becomes difficult for suppliers to manage. Unsecured credit lines offer flexibility in repayment terms. Also, suppliers can borrow from the lender multiple times after repaying their balance and use it whenever required. This enables suppliers to plan their repayment schedules optimally to maintain adequate cash flow throughout the year, even when the demand has declined.
4. Improved Customer Relationships
When suppliers are nearing the busy period of the festive season, they need to be able to match the demands of their customers not just to boost their revenues but also to ensure they maintain their customer relationships. If the supplier lacks the cash needed to service their customers’ demand, they will most likely also lose their reputation. Due to the highly competitive nature of the market, they can face long-term negative impacts on their customer relationships. Unsecured credit lines help to mitigate this challenge by offering quick and easy access to cash. Moreover, being able to help their customers to leverage the opportunities of the festive season means that they can further strengthen their relationships with their buyers.
The festive season has always been a period for business owners to witness the most extensive sale cycle, whether online or offline. To be able to meet these rising demands conveniently, suppliers seek out unsecured credit lines for festive season as a financing solution. Unsecured credit or collateral-free credit line offers suppliers flexibility and convenience, allowing them to maximize their operations.
Customer is king and meeting their needs quickly is always a priority for businesses, especially during the festive season. Unsecured credit lines are one of the most easily available ways to get access to cash quickly and conveniently. Bizongo’s supply chain financing allows suppliers to procure unsecured credit lines or collateral-free credit with minimal paperwork. Its digital procurement workflow speeds up the process and enables vendors to get quick cash to help their goods hit the market faster. You can contact us to learn more about how you can get access to an unsecured collateral-free credit line easily.