The term dealer financing can definitely confuse Indians and Americans, as dealer financing mean one thing in India and another in United States. In India, dealer financing is similar to channel financing – financing available to distributors to purchase goods from manufacturer or national distributor. Whereas in United States, dealer financing mean indirect financing the purchase of cars by consumers from car dealers and various other purchases by consumers from other retail outlets. The dealer financing is quite popular in India, and mostly banks and big NBFCs give dealer financing to distributors. Lately, new fintech players, such as LOANMEET, have started giving dealer financing to distributors.


Dealer financing enables both distributors and manufacturer to increase profits and sales. To distributors, the manufacturer gives goods on cash\Cheque or credit. The cash payment works for manufacturer, but the distributor is not sure whether he would be able to sell goods to retailers. The credit works for distributors, as it gives bargaining power to distributors especially if the goods are not sold. However, if the manufacturer has to give goods on credit, then his/her payments are delayed for various reasons, impacting the cash flows of manufacturer.


With dealer financing, the distributors get credit whereas the manufacturers get immediate cash. The dealer financing helps manufacturers increase sales, as dealer financing enables distributors to purchase more from manufacturers. While the distributor usually has funds to purchase from manufacturers, but the distributor does not want to deploy funds and take risk. The dealer financing works like Invoice discounting in which the manufacturer bears the interest cost, and distributor pays the Invoice amount. Let’s understand this through a simple example.


Credit Period: 1 Month

Invoice Amount: Rs. 100

Monthly Interest Charged by Bank: 2% per month


Day 1: Manufacturer Delivered Inventory to Distributor

Day 2: LOANMEET transfers Rs. 98 (Rs 100 minus 2%) to Manufacturer

Day 30: LOANMEET collects Rs. 100 from Distributor


At the end of day, the dealer financing can only help both manufactures and distributors if goods built by manufacturer are in demand, and the distributor is able to sell goods to retailers. As of today, Xiaomi ( maker of MI phones ) has no problem in selling phones in the Indian market. Thus, Xiaomi would not want to bear the cost of interest, and enable distributors to get dealer financing. However, manufacturers of smaller brands are unable to sell their phones, and they would love a player, such as LOANMEET, to provide dealer financing to its distributors.