The Role of the TReDS Portal in Supporting India’s MSME Sector
                     The Role of the TReDS Portal in Supporting 
India’s MSME Sector
The Trade Receivables Discounting System (TReDS) is a platform 
designed to streamline the financing and discounting of trade 
receivables for Micro, Small, and Medium Enterprises (MSMEs) 
through a network of multiple financiers. By enabling MSMEs to 
quickly receive payments on invoices issued to diverse buyers 
such as corporations, government entities, and public sector 
undertakings (PSUs), the TReDS platform enhances their cash 
flow management.
In this blog post, the role of the TReDS portal in supporting 
India’s MSME sector.
But first it is important to understand the working capital woes of 
Indian MSMEs.
The risk of late payments frequently paves the way for the expansion 
of many Indian MSMEs. Consider an MSME that has painstakingly 
completed an order, paying for labour and raw materials, only to have 
to wait a long time to receive the money they are due. For many small 
businesses around the country, this is their reality. The below points 
will give insight into it:
• The cycle of delayed payments: Delays in payments are a 
widespread problem. 
Despite their financial resources, large purchasers frequently take a 
long time to pay their MSME suppliers. The cash flow of the MSME 
may be severely hampered by this delay, which may last for weeks or 
months
• Consequences of inadequate working capital: One of the main 
obstacles to MSMEs' growth is a lack of working capital brought on 
by these payment delays. They find it difficult to make investments 
in vital areas like increasing production capacity, modernising 
technology, or even carrying out necessary marketing campaigns 
when they lack easily accessible funding. It becomes increasingly 
difficult to pay for immediate operating expenses like rent and 
salaries. 
Additionally, jeopardised is their capacity to bargain for advantageous 
terms with their own suppliers. In the end, a lack of sufficient working 
capital can inhibit innovation and prevent these businesses from 
growing to their full potential.
• The need for efficient financing solutions: Given these enormous 
financial strains, it is evident that Indian MSMEs urgently require 
timely and effective financing options. Several MSMEs may find it 
difficult to obtain bank loans through traditional channels because 
they lack collateral or have a short credit history. Here, the idea of 
receivable financing—which involves obtaining money based on 
what is owed to them via their invoices—becomes a vital lifeline. It 
provides a means of filling the void left by late payments and 
bringing much-needed liquidity into their business operations.
Now it's time to talk about its role in supporting MSMEs by 
understanding the benefits that these companies get. Below are 
those benefits:
• Better cash flow and liquidity: The primary benefit is the quicker 
access to capital. MSMEs can almost instantly unlock the value of 
their receivables rather than waiting for lengthy payment cycles, 
which greatly improves their cash flow and liquidity.
• Less dependency on traditional loans: By providing an alternate 
financing option that is closely related to their sales transactions, 
TReDS lessens their dependency on potentially onerous 
traditional bank loans.
• Better negotiation power: Improved cash flow frequently puts MSMEs 
in a better position to bargain for better terms from their own suppliers 
and, eventually, even from their buyers.
• Simplified process: Compared to traditional methods, the TReDS 
portal's digital nature simplifies the financing process by cutting down 
on paperwork and increasing accessibility.
• Competitive discounting rates: When several financiers bid on 
invoices, the discounting rates become more competitive, which lowers 
the cost of financing for MSMEs.
After discussing these benefits, MSMEs should learn about TReDS 
registration process. This entails the buyer confirming and approving a 
legitimate invoice that the MSME supplier submits to the TReDS 
platform. 
A number of financiers begin placing lower bids on the invoice after it 
has been approved. The MSME has the option to accept or reject these 
bids; if they accept, the payment is completed and the lower sum is 
credited to the MSME supplier's account.
After learning about all this, businesses need to learn about 
M1xchange.
Approved by the Reserve Bank of India (RBI), M1xchange TReDS 
operates as a pan-India digital platform designed to facilitate the 
discounting of invoices and bills of exchange for MSMEs. Mynd 
Solutions Pvt Ltd received 'in-principle' authorisation from the RBI on 
November 24th, 2015, and launched M1xchange on April 7th, 2017, 
under the Payment and Settlement System (PSS) Act 2007.
This invoice discounting platform serves the financial needs of MSMEs 
nationwide by enabling them to secure financing through the conversion 
of their trade receivables into liquid funds on a without-recourse basis. 
M1xchange employs a distinctive bidding process involving nationalised, 
private, and foreign banks to ensure competitive financing rates.
Conclusion
A key component of the continuous initiatives to strengthen India's 
MSME sector is the TReDS portal. TReDS full form is Trade Receivables 
Discounting System. It has the potential to significantly increase the 
growth and sustainability of these crucial businesses by directly 
addressing the ongoing problem of late payments and offering a 
simplified path for working capital financing.
Improved liquidity, less dependence on conventional debt, and 
increased bargaining power are all significant advantages for MSMEs. 
Following a discussion of these advantages, MSMEs ought to get 
familiar with TReDS registration process.
M1xchange TReDS is a digital marketplace, approved by the RBI, 
enabling pan-India discounting of invoices and bills of exchange for 
MSMEs through banks and NBFCs. Established by Mynd Solutions Pvt 
Ltd, one of three companies granted RBI 'in-principle' approval on 
November 24th, 2015, M1xchange launched on April 7th, 2017, under 
the PSS Act 2007. It addresses MSME financing needs by allowing 
them to convert trade receivables into liquid funds without recourse, 
utilising a competitive bidding model involving various banks.
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[email protected]
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