TReDS Simplified: Everything You Need to Know

Trade Receivables Discounting System (TReDS) is an RBI-regulated digital platform designed to facilitate invoice discounting for Micro, Small, and Medium Enterprises (MSMEs). It helps small businesses unlock working capital by enabling them to sell their approved invoices to financiers (banks and NBFCs) in a transparent bidding process. This system benefits MSMEs by ensuring early payments without requiring them to take on additional debt. Meanwhile, corporate buyers can extend their credit periods without financial strain, and financiers gain access to new investment opportunities.

How Does TReDS Work?

TReDS operates through a well-structured process, ensuring efficient financing for MSMEs. The entire process unfolds in five key steps:

1. Invoice Upload – MSME suppliers upload their approved invoices onto the TReDS platform for financing consideration.
2. Buyer Approval – Corporate buyers verify and approve the invoice to confirm the validity of the transaction.
3. Financier Bidding – Multiple banks and NBFCs compete by offering discounted rates for early invoice payments.
4. Payment Disbursement – The highest bidder provides upfront funds to the MSME supplier, usually within 24 hours.
5. Buyer Repayment – The corporate buyer repays the financier at the agreed-upon credit term, typically ranging from 60 to 90 days.

By streamlining invoice discounting, TReDS ensures timely payments to MSMEs, extended credit periods for buyers, and profitable lending opportunities for financiers.

Factors to Consider Before Adopting TReDS

While TReDS provides numerous advantages, businesses must evaluate the following factors before implementing it:

• Eligibility Criteria – Only MSMEs registered under Udyam and corporate buyers meeting specific financial criteria can participate.
• Financing Costs – While competitive bidding ensures low-cost financing, companies must assess the final discounting rates.
• Integration with ERP – Businesses should ensure that their ERP systems (SAP, Oracle, etc.) can seamlessly integrate with the TReDS platform.
• Supplier Readiness – MSMEs must be educated and onboarded onto the platform for smooth operations.

Who Can Use TReDS?

TReDS is designed to benefit multiple stakeholders in the supply chain ecosystem, including:

• MSME Suppliers – Get immediate liquidity by selling their invoices, improving cash flow without taking on loans.
• Corporate Buyers – Extend credit periods while ensuring their suppliers receive timely payments.
• Financiers (Banks & NBFCs) – Provide invoice discounting services and earn returns on short-term financing.

TReDS is particularly beneficial for businesses with large supplier bases, where timely payments and efficient cash flow management are critical.

Benefits of TReDS

Here are the benefits of TReDS-

1. Faster Payments for MSMEs

MSME suppliers receive payments within 24 hours of invoice approval, eliminating cash flow constraints and reducing their reliance on high-interest loans or overdrafts.

2. Extended Credit Periods for Buyers

Corporate buyers can extend their payment cycles by 25-45 days without negatively impacting their supplier relationships or incurring additional borrowing costs.

3. Zero-Cost Financing for Buyers

Unlike traditional bank loans, TReDS allows buyers to extend payables without taking on additional debt or pledging collateral, making it a cost-effective working capital solution.

4. Improved Compliance with MSME Payment Regulations

The MSME Development Act mandates that payments to MSME vendors be made within 45 days. TReDS ensures compliance while protecting buyers from penalties and legal repercussions.

5. Strengthened Supplier Relationships

MSMEs benefit from predictable cash flows, fostering stronger and more reliable supplier-buyer relationships, which contribute to long-term supply chain stability.

How Large Enterprises Use TReDS for Credit Extensions

Large enterprises leverage TReDS to optimize their working capital cycles while supporting their MSME suppliers with timely payments. Here are some practical use cases:

1. Optimizing Cash Flow Without Hurting Suppliers

A leading FMCG company implemented TReDS to extend its credit terms by 25+ days while ensuring its MSME suppliers received early payments within 24 hours. This helped the company maintain liquidity without straining supplier relationships.

2. Strengthening Vendor Relationships Through ERP Integration

A major manufacturing firm integrated TReDS with its Enterprise Resource Planning (ERP) system (SAP), enabling seamless invoice processing. As a result, they improved operational efficiency and enhanced EBITDA by 5%.

3. Supply Chain Finance for a Global Brand

A global consumer goods company onboarded its MSME vendors onto TReDS, providing them instant liquidity while extending its own credit periods. This allowed the company to optimize cash flow without increasing its borrowing costs.

With over 1,500+ enterprises, 3,00,000+ suppliers, and ₹24,000Cr+ invoices processed, CashFlo empowers businesses to optimize working capital, enhance financial compliance, and foster long-term supplier relationships.

Conclusion

TReDS is transforming supply chain finance by offering zero-cost credit extensions, faster MSME payments, and regulatory compliance. Businesses that leverage TReDS can optimize working capital, enhance vendor relationships, and reduce financial risks.

For enterprises looking to maximize the benefits of TReDS while ensuring efficient supplier payments, CashFlo offers an advanced supply chain finance solution tailored to their needs.

Want to see how TReDS can benefit your company? Book a demo with CashFlo today and unlock the full potential of supply chain finance!

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