By Jon Richman, Head of Trade and Financial Supply Chain Americas, Global Transaction Banking, Deutsche Bank, and Joao Luiz A. Galvao, Head of Financial Supply Chain Americas, Global Transaction Banking, Deutsche Bank

Distributor finance, also known as channel finance, is built on the concept of a large corporate supporting an established network of key, geographically-strategic distributors to reach and expand their operations and sales into new markets. It is a revolving line of credit often available for a short-term basis and with the specific purpose to finance inventory purchases from the anchor supplier.

Origins of Distributor Finance

While distributor finance programs are relatively new for emerging markets, some large corporates have long been sponsoring these types of programs to support their distributors. For example, the automotive industry has continued to use distributor finance programs for dealer floorplan financing, allowing dealers to borrow against retail inventory. The dealer then repays that debt as they sell their inventory and borrow against the line of credit to add new inventory.