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Channel Finance

first stage dealers get finance for purchase of commodities

Learn more about the attractive Channel Finance Scheme from TMB.

This scheme is very popular among the developed and fast developing cities and towns. Under this scheme the bank funds the purchase of commodities from manufacturers / stockists by first stage dealers. It is very popular among all the white goods showrooms and large dealers who regularly buy from manufacturers and sell to customers.

Salient Features:

It is meant for financing sale of equipments, vehicles and other commodities in the hands of the first stage Distributor / Dealer. This finance is applicable only to sales against sight-payment (i.e. not on credit terms) at the hands of first stage Distributor / Dealer. It is a sort of transit finance in the sense that the goods may be in transit when finance request is made under the scheme. The manufacturer is funded for his sales (supply of equipments, vehicles, commodities etc) whereas the first stage Distributor / Dealer is financed for his purchase through the TMB Channel Finance.

Purpose
To finance the purchase of commodities from manufacturer / stockists for first stage dealers only.
Eligible Commodities
  • Any “commodity” supplied directly by, either the Manufacturer or the Stockist (who procures commodities from the manufacturers / imports from abroad).
  • The “commodity” should be that of a reputed brand.
  • The “commodity” should be fast moving consumer goods category.
  • Examples: Vehicles, Petroleum products, Biscuits / Confectioneries, Edible oils, Fast Moving Consumer Goods (FMCG), etc., all of reputed brands.
  • (The underlying feature is, goods are normally not sold on credit terms by the manufacturer / stockist).
Elligible Borrower
  • First stage dealer in the above commodities.
  • The borrower should be rated Good and above according to our credit rating exercise.
  • Initially for a period upto 6 months and until reviewed by our Board, the scheme may be restricted to the existing customers only.
Primary Security
Commodities procured from the manufacturer/stockist under each of the invoice (Trust period: Date of invoice to date of receipt at the warehouse of the borrower). The invoice should bear particulars of our Bank’s charge over the commodities and Book-Debts with a cover period of maximum 90 days (applicable only for select commodities which are sold not to the actual user but to another sub-dealer). The quantum / value of collateral need not be the deciding factor for credit decision.
Collateral Security
Any quantum of legally enforceable asset / property (movable / immovable) according to the discretion of the sanctioning authority for each borrower and from time to time. Additionally Personal Guarantee of any partner(s) / director(s) / according to the discretion of the sanctioning authority for each borrower and from time to time.
Margin
0%.
Style of Credit
One Demand loan for each lot consisting of one or more invoices (i.e.) there can be multiple demand loans with aggregate balance less than the over all sanctioned credit limit.
Rate of Interest
  • Commodity will be a fixed asset to actual end user (e.g. Motor Vehicle)
  • 0-30 days from date of Invoice - BR + 2.75% (13.50% p.a.).
  • 31-45 days from date of Invoice - BR + 5.75% (16.50% p.a.).
  • 46-90 days from date of Invoice - BR + 10.75% (21.50% p.a.).
  • 91 days from date of Invoice to till recovery - BR + 12.75% (23.50% p.a.).
  • Commodity will be a current asset / consumables to the actual user or buyer (eg. Biscuits, Petroleum Products, edible oils etc.)
  • 0-30 days from date of Invoice - BR + 3.75% (14.50% p.a.).
  • 31-45 days from date of Invoice - BR + 5.75% (16.50% p.a.).
  • 46-90 days from date of Invoice - BR + 10.75% (21.50% p.a.).
  • 91 days from date of Invoice to till recovery - BR + 12.75% (23.50% p.a.).
  • Current Base Rate for Lending (BR) is 10.75% p.a.
Processing Charges
Rs. 400 per lakh or fraction thereof to be collected upfront at the time of sanction intimation.
Quantum of Finance
Pre-sanction appraisal should quantify separate limits under (a) TMB Channel Finance and (b) Other style of credit within the overall MPBF ascertained. Alternatively advances under this style of credit will necessitate reduction in existing quantum of working capital limits against stocks and / or receivables. The existing working capital limits (against stock) can be used to liquidate fully or partly the balance outstanding in the Channel Finance.
Documentation
Simple Documentation as per Bank Norms.

This scheme is unique in the following respects:

  • The borrower is rewarded with 100% finance.
  • The rate of interest for the loan is directly related to the loan period. In other words, shorter the loan period lower is the rate of interest and higher the loan period, higher is the rate of interest.
  • The rate of interest for the loan is inversely related to the loan amount. In other words, higher the loan amount lower is the rate of interest and lower the loan amount, higher is the rate of interest.
  • Borrowers with a credit rating of Good and above get enhanced credit at competitive rate of interest.

All the above Terms and Conditions are subject to change and sanctioning of the loans is at the sole discretion of the Bank. Service Tax on All Service Charges extra wherever applicable.