TReDS vs Traditional invoice financing: What’s better for your business?

 

TReDS vs Traditional invoice financing: What’s better for your business?

A sustaining business is not just about making sales. It is also about getting paid on time. But as many MSMEs know, payments can take 30,60, even 90 days to come in.

This is the reason why many businesses turn to invoice financing. It helps them access money tied up in unpaid invoices. But today, there is more than one way to do it. The traditional route through banks still exists, but there is a faster, more transparent option now - TReDS.

Let us break down and help you figure out what works best for your business.

What is Traditional Invoice Financing?

In the traditional setup, you approach a bank or NBFC with your unpaid invoices. They give you most of the amount in advance, keeping a small portion as a fee. You get the rest once your customer pays.

Sounds simple, but there are some drawbacks:

• You often deal with just one lender

• The process involves paperwork and follow-up

• The interest rates can be high

• You may need to provide collateral

This method works, but it is not always the quickest or the easiest.

What is TReDS?

TReDS stands for Trade Receivables Discounting System. It is an online platform introduced by the RBI to help MSMEs get their payments faster and without hassle.

Instead of going to a bank, you upload your invoice on a TReDS platform like M1xchange. Your buyer approves it. Then. multiple banks and financiers place bids to give you the best rate. You pick the best offer, and the money is in your account, usually within 24-72 hours. 

Why more businesses are choosing TReDS

TReDS is becoming popular, especially among MSMEs. Here’s why:

1. It is 100% digital: Forget about physical documents and long approvals. Everything from TReDS registration to invoice upload is done online.
2. You get multiple offers: Instead of relying on one bank, you get bids from several financiers. That means better rates and more choice.
3. No collateral needed: You do not need to pledge property or assets. Your invoice and the buyer’s approval are enough.
4. Faster payments: Once your buyer confirms the invoice, the money reaches you within a few hours or days.
5. It is RBI-regulated: Since TReDs is backed by the Reserve Bank of India, the process is transparent and safe.

Getting started: TReDS registration

To use TReDS platform like M1xchange, you will need to register first. But do not worry, it is simple:

• Fill out a basic form online

• Upload your PAN, GST and a few business documents

• Once verified, you are good to go

After that, you can start uploading invoices and receive payments without waiting for the actual due date.

TReDS vs Traditional financing
 

Feature	Traditional Invoice Financing	TReDS
Application Process	Manual, paperwork heavy	Fully online
Time to get funds	Days to weeks	1-3 days
Lenders	Usually one bank	Multiple banks/NBFCs
Rates	Fixed, may be higher	Competitive bidding
Collateral	Often required	Not needed
Transparency	Low	High (RBI-regulated)

 
Which one should you choose?

Go with TReDS if:

• You sell to large corporates

• You are an MSME looking for faster cash flow

• You do not want to deal with paperwork or collateral

• You want better rates than competition

Stick to traditional financing if:

• Your buyer is not registered on TReDS yet

• You have an existing arrangement with your bank

But more and more businesses are shifting to TReDS; because it is easier, faster, and gives you more control.

Conclusion

Every rupee stuck in an unpaid invoice is a missed opportunity. Whether you choose a bank or a digital route, invoice financing helps you unlock that money and keep your business moving.
That said, TReDS platforms like M1xchange offer a better, more efficient way to access funds. With quick payments, no collateral and full transparency, they are changing the way MSMEs manage their cash flow.
If you have not tried it yet, now might be the right time to explore TReDS registration and give your business the cash flow boost it deserves.