What is the TReDS Platform and How Does It Work?

TReDS (Trade Receivables Exchange Discounting System) is a digital platform that facilitates quick funding access for micro, small and medium enterprises. These MSMEs can get funding for their daily working capital by selling their trade receivables or invoices to financiers or lenders. Trade receivables meaning the amount that a business is due to receive in exchange for the goods and services it has sold to its customers.

TReDS platform speeds up the payment flow, guarantees transparency and cuts down on processing time. It also minimises the difficulties caused by late payments, which frequently affect MSMEs' ability to conduct business.

It's important for MSME business owners to understand how the TReDS platform works before they use it.

What is the TReDS Platform and How Does It Work?

By step-by-step process, let's learn how this platform works.

●        Registering on this Platform

The very first step to begin with is registering on the TReDs platform, for both financiers and MSMEs (sellers). Required documents have to be submitted for verification. After verification, the platform becomes accessible.

●        Uploading Invoice

Subsequently, MSMEs will need to post their authorised invoices on this website—that is, invoices for products or services rendered to big businesses.

●        Auctioning of Invoices

Furthermore, after the invoice uploading, the invoices will be up for auction. This will allow various lenders and financiers to bid to purchase them at a discounted rate depending on their credit histories.

●        Approval of Invoices

 It is necessary that the invoice be approved or verified on the TReDS platform by the company/business on whom it is drawn, often known as the "buyer." This will give the invoice legal standing.

 

●        Receive the Payment Directly

●        The MSME can choose the financing option that best meets their needs after being approved. This is the point where the discounted bill amount, the conditions of payment and other information can be discussed. After that, the MSME receives the payment directly.

●         Paying Back the Sum

Upon the agreed date or time, the corporation or buyer repays the invoice amount to the financer on the TReDS platform immediately.

To Whom is TReDS Applicable?

Let's see some more factors involved in the process. We must clearly understand the works of TReDS. It is necessary to learn who has and can access the TReDS platform.

Participants at the TReDS portal are the:

●        Sellers

These sellers consist of micro, small, and medium enterprises (MSMEs) on the TReDS platform. On the site, they may post invoices and promptly get financing for them. Here, the technique is invoice financing, invoice discounting, or factoring.

●        Buyers

These buyers comprise the government agencies, corporations, PSUs, and other businesses that have registered on the TReDS platform. They can use the portal to efficiently manage payables by making sure they approve invoices as quickly as possible to enable payments to their suppliers (MSMEs). This kind of supply chain funding will ensure that there is operational ease and no problems in the supply chain.

●        Financers

These include the banks and NBFCs participate as lenders in the TReDS procedure. They put forward bids for the invoices and provide MSME vendors the money they need. This form of short-term funding maintains process transparency and security by offering the money at a slight discount or interest rate.

Which platform has RBI approval for TReDS?

RBI has certified three companies to set up the Trade Receivable Discounting System (TReDS) platform. One of the companies is Mynd Solutions Pvt. Ltd., which created M1xchange in the year 2017.

Some more insights into the TReDS platform.

It was formed to create a global trade finance community that would revolutionise liquidity access and promote equitable growth.

They have made a strong position in this domain thanks to the reasons such as:

●        Good leadership

●        Balanced teamwork

●        Best customer service

●        Emphasises on respect, trust, innovation, sustainability, learning, growth and overall well-being.

Their investors are renowned brands like:

●        Amazon

●        Mayfield

●        BEENXT

●        IndiaMART

●        SIDBI Venture Capital Limited

Conclusion

Micro, small, and medium-sized businesses can quickly obtain capital using the digital platform called TReDS. A business of any size can get funding for daily working capital by selling its trade receivable or invoice to financiers or lenders.

Mynd Solutions Pvt. Ltd. is one of such companies that have been allowed to form a TReDS platform by the RBI. In 2017, it introduced M1xchange, which has now become a renowned TReDS platform.