TReDS facility- What it is? How it benefits MSME'S in solving cash flow problems by timely repayment

How to Get Paid by your Customers Sooner!

If you have large corporates or PSUs as your clients and your invoices get paid after 30-45 days, then you always have money blocked in business as you have to shell out more funds from your pocket to meet expenses in the interim.

This creates a working capital problem.

Invoice Discounting or Factoring helps where a banker or an NBFC gives you early access to your money in return for a small deduction. So instead of receiving the invoice amount of Rs 100, you get Rs 99 and the bank keeps Re 1 as it’s charge or say, interest.

This is say 1% for early access to your payment by 30 days, thus, simplistically, converts to interest rate at 12% p.a.

TReDS - Trade Receivables Discounting System is an electronic platform set up by the government to help MSME businesses with invoice discounting.

Participants on these platforms are Sellers, Buyers, and Financers. Sellers need to be MSME entities with valid Udyam registration. Buyers must be large corporate houses, and Financers are banks and NBFCs.

On completion of registration at any of the three available portals, viz. rxil.in, m1xchange.com or invoicemart.com, the invoices against which the vendor wants early access to funds are uploaded.

Once the customer approves those invoices, the financers would bid with terms of discount they are willing to offer. The MSME vendor is free to select the financer offering the best terms of financing.

P.S. I personally have not used this website, but would love for anyone who has any experience of it to share it in the comments and let me know.

#msmes #msmebusiness #msme #smebusiness #smallbusiness