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The economic turmoil caused by the recession and exacerbated by the COVID-19 pandemic has left a lasting impact on businesses worldwide.

Among those hit hardest are small businesses, which are grappling with lost sales and dwindling working capital, according to Meta‘s ‘Global State of Small Business Report’ over 20,000 small businesses globally.

Beyond the pandemic’s aftermath, small businesses now confront additional adversities, including supply chain disruptions, geopolitical uncertainties, inflation, and soaring energy and production costs.

With the festive season fast approaching, small businesses are bracing for an important juncture. The festive season is a crucial period for businesses as more than 70% of SMB owners anticipate generating more than half of their annual revenue during the festive months.

As consumer demand surges, small businesses need to ensure smooth operations, timely order fulfillment, and sustainable growth. One critical aspect that demands careful attention during this period is working capital efficiency.

During the festive rush, small businesses face unique challenges that can strain their financial resources. According to industry reports, the average working capital requirement for small businesses increases by approximately 40% compared to other times of the year.

This surge in demand results in a need for increased production volumes, extended credit terms, and complexities in inventory management. Consequently, working capital requirements can escalate significantly, placing a burden on small business owners.

Unleashing financial agility with supply chain financing

To tackle these working capital challenges, supply chain financing emerges as a valuable financial solution for small businesses. It enhances cash flow by allowing small businesses to convert their receivables into immediate working capital.

This improved liquidity allows them to manage production and procurement needs efficiently during the festive rush.

Research shows that supply chain financing can result in a 30% reduction in cash conversion cycles for small businesses during the festive season. Moreover, it reduces reliance on traditional lending channels, providing small businesses with greater financial autonomy and flexibility.

Strengthening supplier relationships

Smooth operations during the festive rush depend heavily on strong relationships with suppliers. Supply chain financing strengthens these relationships by enabling prompt payment solutions and offering financial stability to suppliers.

This fosters collaboration and encourages long-term partnerships. It allows small businesses to invest in research and development, expand production capacity, strengthen their market position, build resilience, and foster sustainable supply chain practices.

The power of tech

Embracing technology to elevate operational efficiency and optimize working capital management during the festive season has become imperative in the modern business landscape.

Automated invoice processing, dedicated supply chain finance platforms, data analytics, and integration with ERP systems streamline processes, eliminate manual errors, provide real-time visibility, and enable data-driven decision-making.

These technological advancements foster transparency and stronger relationships with suppliers and lenders, ensuring seamless operations and maximizing productivity during the festive season.

Future of supply chain financing for small businesses

The future of supply chain financing holds significant promise for small businesses. Advancements in technology, such as blockchain, data analytics, and digital platforms, are set to revolutionize supply chain finance.

These technologies offer increased transparency, improved risk assessment, and enhanced efficiency in supply chain financing processes.

According to market research, the global supply chain finance market is projected to grow at a CAGR of 12.5%, providing small businesses with even more accessible and effective financial solutions.

Manish Kumar is the Founder and CEO of invoice discounting company KredX