Trade Receivables Discounting System is a welcoming step by the RBI to regulate the trade receivables between MSMEs, large corporates and financiers. This is beneficial not just for these individual players, but for the entire economy of the nation.
To decrease the financing concerns faced by MSMEs in India, RBI introduced the concept of TReDS in 2014, an institutional mechanism for financing trade receivables on a secure digital platform. Trade receivable exchanges such as M1xchange, are helping the MSME supplier get early payment against their invoices with minimum paperwork in just 2-3 days. Since invoice discounting on TReDS ensures regular payment and optimized cash flow, many MSMEs are now using TReDS as their preferred mode of payment.
TReDS addresses the gaps in MSME industry as enterprises face challenges in getting their payments on time, thus creating working capital discrepancies. TReDS is a timely and effective solution to drive the MSME sector to the next phase of Indian economy.
Why TReDS ..?
– RBI Regulated institutional mechanism.
– Funds get credited to the supplier account in T+1 day.
– Suppliers can choose the best factoring companies on parameters such as transparency, customer confidentiality, factoring rates and fees.
– Alternate, efficient funding system for making vendor payments.
– Quick finance of trade receivables at moderate rates.
– Financiers can fulfill PSL targets efficiently in less time.
Mandatory Registration –
The Ministry of Micro, Small and Medium Enterprises (MSME Ministry) vide its Notification (MSME Notification) bearing S.O. 5621(E) dated November 02, 2018 has mandated all companies (Large Corporates) registered under the Companies Act, 2013 with a turnover of more than Rs. 500 Crore (Rupees Five Hundred Crore) as per the last available audited financial statements and all Central Public Sector Enterprises (CPSEs) to get themselves registered on the TReDs Platform to ensure cash liquidity for MSME Suppliers.
Benefits of Registration under TReDS.
TReDS helps a supplier to realize payment against an invoice raised to a buyer, through a financier at discounted rates, in significantly less number of days as compared to the buyer company’s regular credit period timelines. Here are some of the key benefits of TReDS for MSMEs
- Get easy and quick working capital at much cheaper interest rates as compared to business loans.
- Enjoy collateral-free quick finance with one-time documentation
- Get paid for your invoices next day after acceptance of discounted amount.
- Obtain off-balance sheet finance, the amount does not reflect as a loan in your balance book.
- Maintain a regular cash flow with M1xchange and grow your business