Page 25 - Banking Finance February 2022

ARTICLE

MSME supplies goods or services to the large Corporates, Operational details of TReDs
Government department, PSU etc and raises a bill/invoices
for payment. Generally the invoices are paid to the supplier/ Market timings of Auction are 9 a.m. to 9 p.m. every day.
seller in a given due date says 60 days/ 90 days or even Cut Off time is- 4.00 p.m., if bid is accepted before it, then
more. But for a smoother operation, MSME unit needs a the settlement will be on T+1. After the cut off time, the
regular cash flow. settlement will be on T+2 (Bid Acceptance Date + 2 working
days).
Buyer or large Corporates accepts the invoices raised by the
supplier in the TReDS platform. The process is called If the factoring unit is not accepted by anyone on TReDS
Factoring and the reverse process where Buyer uploads the portal for auction, then buyer will pay directly to seller
invoices and MSME accept it, is called Reverse Factoring. outside the portal.
After acceptance of the invoice by counterparties, it
becomes a Factoring Unit and it goes for online auction in Costs involved in financing are
the TReDS platform.
Interest Cost paid by buyer/seller as may be decided by
The financer bids for the receivables and enter the them mutually.
discounted rate. After the successful bidding, supplier/seller Transaction charges to TReDS for factoring.
accepts the discounted rate for receiving quick payment of
the receivables.
Benefits of using TReDS
After the approval from seller, the financer account gets Unified electronic platform for Sellers, Buyers &
debited for the final payment (after discounted rate) to Financiers.
MSME a/c on T+1 or T+2 days of successful completion of Easy & fast working capital finance for MSMEs at
bidding. cheaper interest rates.

On due date of invoice, the Buyers (Large Corporates) Without recourse/ non-collateral based finance for
account's get debited and corresponding Financer account MSMEs
credit to make the transaction complete. Liquidity improves for MSME as there is easy/quick

access of funds.
TReDS Process flow:
Saving on procurement
cost of corporate buyers
through improved
negotiation of financing
terms for suppliers.
Security of digital
platform for confidentiality
of information.

Financiers can get
benefit of PSL (Priority
Sector Lending) by
financing the receivables
of MSME seller.
Financiers get access to
a large clientele of MSME
customers and corporate
Source: slidepayer.com customers

BANKING FINANCE | FEBRUARY | 2022 | 25