TReDS For MSMEs a Complete Guide

TReDS For MSMEs: A Complete Guide

MSMEs Of India

“A strong economy is the source of national strength”-Yoshida Suga. Economic growth is the foundation of national growth. It is the key to the development and prosperity of a country. The primary focus of any country should always be economic growth to strive toward the direction of development and prosperity. Hence, the government focuses on economic growth and injects impetus as and when needed. 

The government frequently launches grants and funding schemes for the sector which needs additional support and nurturing for growth and development. These schemes provide much-needed support in various forms. They are curated keeping the challenges in mind. One such impetus is the TReDS scheme, conceptualised to solve the problem of fund availability for the MSMEs. Let us begin with understanding TReDS better.

What is TReDS?

What is TReDS

First things first, the full form of TReDS is Trade Receivable Discounting System. It is an online platform launched for MSMEs. It allows the MSMEs to systemize and manage the trade receivables/discounting bills. It enables the availability of short term financing. This aims to solve the issue of unpaid invoices and discounting bills management. 

This online platform launched by the RBI in 2018, helps the MSMEs to avail discounting on their bills and invoices. It is curated for faster payment and cutting down the annual interest payouts for SMEs. TReDS basically aims to become a credit extender (where discount = interest paid to the financier) and allows lenders to fund the trade receivables. The broader objective of the scheme is to ease out the credit or discount availing process on Trade Receivables for the MSMEs. It is a payment system that is authorised under the PSS Act. 

Features of TReDS

TReDS basically solves the problem of lack of available funds, inadequate cash flow that hampers day-to-day operations, negative impact on the business, and credit score getting affected resulting in difficulties for credit obtaining ahead. 

  • A common platform for MSME sellers, corporate buyers, and banks
  • Online transactions
  • Easy access to funds
  • Ensured data flow with a standardized process.
  • Competitive discount rates
  • Working capital is accessible between 24 to 72 hours
  • Shorter cash cycles
  • Collateral is not required for bill discounting service

TReDS Registration Benefits

  • Proper tracking of cash flow for buyers
  • Smooth and error free payment cycles for buyers
  • Less paperwork and money required for buyers
  • Vendors will be able to acquire receipt of funds
  • Access to a broader market for the financer
  • Instrument qualification is ensured
  • Operational cost is reduced

Eligibility For TReDS

Eligibility For TReDS

Who can participate in the TReDS? The answer is 

  • Corporates, Government Departments, PSUs, and other entities that want to participate as a buyer.
  • For financiers – banks, NBFC Factors and RBI-permitted financial institutions and
  • Only MSMEs can participate as a seller.

Want To Apply?

A digital portal like TReDS enables easier access to funds in advance against trade receivables for the MSMEs. As a result, the liquidity needs are met easily and businesses are managed in a better way. All this is possible because of a faster TReDS MSME payment platform that gives quick access to the funds.

Now that you know about the various benefits of the scheme, you must consider moving ahead with your TReDS registration process. You need someone who knows the answer to the “What is TReDS registration and how to go about it?” question. At Egniol Services, we help startups to receive their growth goals by providing the best consultancy services. Our team of experts will assist you throughout the application process with all the necessary documentation and paperwork. Begin your application process today with Egniol. Contact us to know more.

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