Top 5 Benefits of Using the Treds Portal for Your Needs

Top 5 Benefits of Using the Treds Portal for Your Needs

TReDS full form is Trade Receivables Discounting System (TReDS). It is an electronic platform that makes it easier for micro, small, and medium-sized businesses (MSMEs) to discount their trade receivables quickly and effectively. With the help of this platform, MSMEs can get paid on time for invoices sent to a variety of organisations, such as businesses, governmental organisations, and public sector projects. 

TReDS enables MSMEs to efficiently manage their working capital and promote sustainable growth by accelerating cash flow.

In this blog post, the top 5 benefits of using the TReDS portal will be discussed.

1.       Improved Cash Flow
As mentioned earlier, TReDS enables MSMEs to turn their trade receivables (invoices) into instant cash. This greatly enhances working capital and liquidity, allowing businesses to fulfil their operational requirements and also, invest in growth opportunities.

2.       Faster Access to Funding
Traditional financing methods can often take a lot of time.  But TReDS simplifies this process and thus allowing for quicker access to funds through a competitive bidding system. This helps in minimising the waiting period for payments from buyers.

3.       Competitive Discount Rates
The TReDS platform enables a competitive bidding process where various financiers, including banks and NBFCs, participate. These types of competition enable MSMEs secure the most favourable discount rates on their invoices. This helps MSMEs lowering their financing costs.

4.       Reduced Credit Risk
TReDS transactions are usually "without recourse," which means that if the buyer fails to pay, the MSME is not held responsible. This greatly lowers the credit risk linked to trade receivables.

5.       Enhanced Transparency and Efficiency
TReDS platform offers a clear and efficient online system for invoice discounting. This minimises paperwork and manual tasks, helping to save both time and resources. Additionally, it enhances the tracking of invoices.

All of this demonstrates how companies can lower financial risk and enhance overall business performance by utilising TReDS systems.

Even though the main focus here would be sellers, it is still crucial to mention benefits to buyers and financiers in order to know why they have to show interest in it. Here are these benefits:

Benefits to Buyers

·       Reduced financing costs: Competitive lender bidding leads to lower interest rates and financing expenses.
·       Improved supplier relationships: Timely payments strengthen business partnerships.
·     Streamlined operations: Our digital platform reduces administrative burden and paperwork through efficient invoice discounting.

Benefits to Financiers
·       Expanded Market Reach: Financiers gain access to a broader pool of potential borrowers, especially MSMEs.
·       Operational Cost Reduction: Digitalisation and automation streamline loan processing and disbursement, lowering operational expenses.
·       Mitigated Credit Risk: Financing backed by validated invoices, which act as collateral, minimises credit risk.

TReDS Registration Process

After understanding the benefits, it's crucial to discuss the TReDS registration process. This involves the MSME supplier submitting a valid invoice to the TReDs platform, which the buyer then verifies and approves. Once approved, several financiers start making lower bids on the invoice. The MSME can choose to accept or decline these bids; if they accept, the payment is processed, and the reduced amount is transferred to the MSME supplier's account.

Here are the advantages of this platform and its registration procedure. It's time to learn about one of the popular TReDS platforms, i.e., M1xhange.

In 2015, the Reserve Bank of India (RBI) approved three companies to establish Trade Receivable Discounting System (TReDS) platforms. One of the companies is Mynd Solutions Pvt Ltd, which launched the M1xchange platform in 2017 under the Payment and Settlement System (PSS) Act. This platform allows MSMEs across the country to discount their invoices and bills of exchange.

Since it started, M1xchange has been assisting MSMEs in quickly accessing liquidity by converting their outstanding invoices into cash. This is done through a unique bidding process that involves various banks, including nationalised, private, and foreign institutions. The process is streamlined and provides competitive financing rates.

In Conclusion

TReDS full form is Trade Receivables Discounting System. It was released by the Reserve Bank of India in 2018. This platform aims at resolving cash flow issues for small businesses. MSMEs should give TReDS registration a thought if they want to reap its benefits.

To provide MSMEs with rapid access to cash, the RBI has authorised three TReDS platforms, including M1xchange, which facilitates the conversion of outstanding bills into immediate liquidity.


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