Abstract: With the rapid development of e-commerce, many manufacturers have opened their direct channels besides traditional retail channels. When a direct channel is established, opportunities and threats coexist. From the manufacturer's perspectives, running a direct channel cannot only directly improve the profitability, but also enhance the bargaining power with retailers. However, as an emerging sale channel, the demand in the direct channel may be instability and unreliability. Thus, the manufacturer needs to consider the risk arising from the uncertainty of running a direct channel. Moreover, capital constraint is a common phenomenon in the manufacturer's operation due to a direct channel developed. In addition, the presence of the direct channel may intensify the competition between manufactures and retailers, sometimes deteriorating retailers. This may result in retailers' counterattack, including the improvement of service level etc..
Based on the practical background, our research issues are examined:First, how does a risk-averse manufacturer choose the proper financing ways under the advance payment financing with price discount and bank loan financing; Second, whether or under what conditions should a manufacturer choose to run a direct channel; Third, how the manufacturer's financing strategy and channel selection is affected by the manufacturer's risk aversion and the retailer's add-value service. To answer the above questions, a supply chain consisting of a risk-averse manufacturer and one retailer is considered. The manufacturer is capital constrained. Under a manufacturer-Stackelberg game, by formulating the problem as a mean-variance optimization problem and based on the uncertainty of developing a direct channel and add-value services of a retail channel, the advance payment model and the bank loan model are constructed to dispose the manufacturer's optimal financing strategies and channel choice strategies.
Through the analysis of the model, the advance payment is optimal for the capital constrained manufacturer. The retailer is willing to pat in advance when the initial capital is very small. The manufacturer runs the direct channel only when the initial capital is very small and the risk aversion coefficient is large. The retailer should improve the efficiency of the add-value services, and should choose the medium rate of the advance payment to prevent running the direct channel. A numerical example is provided to illustrate the analytical results.

Key words: capital constraint, risk aversion, prepayment, bank loan, add-value services