TReDS & MSME Liquidity: Overcoming Payment Delays with Smart Financing

Micro, Small, and Medium Enterprises (MSMEs) form the backbone of the economy but often struggle with delayed payments, impacting their liquidity and growth. Traditional financing options, such as working capital loans, are expensive and require collateral, making them less accessible to smaller vendors. The Trade Receivables Discounting System (TReDS) offers a digital, RBI-regulated alternative that ensures MSMEs receive timely payments while allowing corporate buyers to extend their credit periods without additional interest costs.

The Impact of Payment Delays on MSMEs

Delayed payments disrupt cash flow, making it difficult for MSMEs to manage day-to-day operations, pay employees, and invest in growth. Many suppliers rely on large enterprises for payments, but extended credit terms put them at a disadvantage. Compliance with the MSME Development Act, which mandates payment within 45 days, adds further complexity. Non-compliance can result in penalties and strained vendor relationships. TReDS solves this issue by providing an efficient, transparent mechanism for early invoice payments.

How TReDS Bridges the Gap Between Buyers, MSMEs & Financiers

TReDS acts as a marketplace where MSME suppliers, corporate buyers, and financiers (banks & NBFCs) interact to facilitate early invoice payments. Here’s how it works:

1. Suppliers upload invoices on the TReDS platform.
2. Buyers approve the invoices for discounting.
3. Multiple financiers bid to offer early payment at competitive rates.
4. The supplier receives funds within 24 hours at a discounted rate.
5. Buyers get an extended payment cycle (e.g., instead of 45 days, they can pay after 70 days).

This structure ensures MSMEs get paid on time while buyers optimize their working capital. For more on the regulatory side, read about the RBI’s role in regulating TReDS.

The Role of CashFlo in Enhancing TReDS Efficiency

CashFlo strengthens the TReDS framework by enabling enterprises to extend payables up to 180 days while ensuring MSMEs get paid early. Companies leveraging CashFlo benefit from:

• A marketplace of lenders offering capital at the lowest rates.
• MSME payment compliance with the 45-day mandate.
• Guaranteed 2% subvention on final negotiated rates.
• Full vendor base coverage (including non-MSME vendors).
• Dedicated program management to onboard and engage suppliers.

With 1,500+ corporations and 3,00,000+ suppliers onboarded, CashFlo has processed invoices worth ₹24,000Cr+, making it a leader in supply chain financing.

Why MSMEs Should Leverage TReDS for Financial Stability

TReDS provides multiple advantages over traditional banking solutions, including:

• Zero-interest credit extension – Buyers extend payment cycles by 25-45 days at no extra cost.
• Instant liquidity for MSMEs – Suppliers get paid in 24 hours, improving financial health.
• Better vendor relationships – MSMEs receive timely payments, enhancing trust.
• Compliance with MSME mandates – Avoid penalties and regulatory risks associated with delayed payments.

How TReDS Ensures Compliance

Automated Payment Process: TReDS enables companies to process payments systematically, ensuring timely disbursal to MSMEs without manual intervention.

Eliminates Late Payment Risks: By facilitating early payments, TReDS removes the possibility of non-compliance penalties and regulatory scrutiny.

Enhances Supplier Trust: When payments are consistently on time, vendor relationships improve, securing a reliable supply chain for businesses.

Thus, TReDS helps companies maintain liquidity while staying fully compliant with MSME regulations. Let me know if you need more details!

Conclusion

TReDS is transforming MSME financing by addressing liquidity constraints and payment delays. Large enterprises can optimize their working capital, remain compliant, and strengthen supplier relationships. With CashFlo, businesses gain access to a robust supply chain finance ecosystem that ensures financial flexibility while meeting regulatory obligations.

Schedule a demo with CashFlo today to see how it can optimize your enterprise’s payment structure and improve financial efficiency!