Why MSMEs Consider TReDS ?

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). It is an electronic platform that allows auctioning of trade receivable. The process is also commonly known as ‘bills discounting’, a financier (typically a bank) buying a bill (trade receivable) from a seller of goods before it’s due or before the buyer credits the value of the bill. In other words, a seller gets credit against a bill which is due to him at a later date. The discount is the interest paid to the financier..

Why MSMEs Consider TReDS ?

• Ability to convert trade receivables into liquid funds.
• Allows MSMEs to post their receivables on the system and get them financed.
• Puts greater discipline on corporates to pay their dues on time.
• Corporates enjoy savings on procurement cost through improved negotiation of financing term for its vendors.
• Corporates save on the financing cost by extending their credit period and augmenting their payment cycle.
• Financiers, on the other hand have an opportunity to build PSL asset portfolio.

The Reserve Bank of India granted approval to Mynd Solutions Pvt Limited to set up and operate M1xchange, the first trade receivable exchange in India. M1xchange has digitally transformed the process of gaining access to working capital for MSMEs via invoice discounting through multiple financiers. TReDS is an answer to the everlasting cash flow issues of the MSMEs in India and effective solution to drive the MSME sector to the next phase of Indian economy.