Often in a business, a supplier will sell his goods to the customer, without collecting cash upfront. The customer is given a credit period, which is negotiated between customer and supplier and typically ranges between 30 and 90 days in India. This amount owed to the supplier is termed as a “trade receivable”. Trade receivables form a part of the current asset base of a company.
Trade Receivables Discounting System or TReDS is a RBI initiative to help the MSMEs in getting competitive finance so that their working capital requirements are met on time which is vital for their growth. The participants involved in TReDS are MSME suppliers, large corporate buyers and financiers (Banks or NBFC Factors). TReDS has suppliers looking to cash in their receivables on one hand, and matches them with financiers willing to buy out these receivables. These suppliers offer a trade discount to their invoices in return for receiving payment early.
For more information, or to learn more about Trade Receivable Discounting System,
please visit : What is TReDS
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