Understanding Dealer Credit Facility
One of the biggest advantages of becoming an authorized cement dealer is access to a substantial credit facility. This article explains how dealer credit works and how to use it effectively.
How Credit Facility Works
- Credit Limit: Up to Rs.2 Crore for qualified dealers
- Credit Cycle: 30 days from invoice date
- No Collateral: Based on dealership agreement and track record
- Scaling: Credit limit increases with consistent payment history
The 8x Leverage Effect
With a Rs.25 Lakh investment and Rs.2 Crore credit facility, you effectively have 8 times leverage on your capital. This means you can sell Rs.2 Crore worth of cement monthly while only having Rs.25 Lakhs invested.
How to Maintain Credit
- Always pay within the 30-day window
- Start with smaller orders and build up gradually
- Maintain proper books of accounts
- Submit monthly sales reports on time
- Avoid over-leveraging — keep a buffer for market fluctuations
Impact on Profitability
Without credit: You can sell only what you can pay for upfront
With Rs.2Cr credit: Your monthly revenue potential increases 8x, and so does your profit. A dealer selling Rs.40 Lakh/month at 22% margin earns Rs.8.8 Lakh — all on a Rs.25 Lakh base investment.