Trade Receivables Electronic Discounting System (TReDS) is an online electronic platform and an institutional mechanism for factoring trade receivables of MSME sellers. It enables discounting of invoices through an auction mechanism to ensure prompt realisation of trade receivables. This system helps improve liquidity and cash flow for MSMEs by allowing them to receive payments quickly. Check your business loan eligibility if you’re considering additional financial support to strengthen your working capital.
How does TReDS work?
TReDS facilitates the financing of trade receivables of MSMEs from corporate buyers and government departments through multiple financiers. MSMEs upload their invoices on the platform, which are then put up for bidding by financiers. The highest bidder gets to finance the invoice, and the MSME receives the payment quickly, improving cash flow and reducing credit risk.
How many TReDS platforms are there currently?
There are three RBI-approved TReDS platforms operating in India:
- Receivables Exchange of India Ltd (RXIL)
- A.TReDS Limited
- M1 Exchange
These platforms help MSMEs access financing through a transparent auction process.
Who is required to register on the TReDS?
| Participant | Description |
|---|---|
| MSMEs | Sellers who want to discount their invoices. |
| Corporates | Buyers who owe payments to MSMEs. |
| Financiers | Banks and NBFCs financing the invoices. |
Registration is mandatory for these participants to use the platform as per RBI guidelines.
What are the documents required for TReDS?
- Business registration proof
- PAN card
- GST registration certificate
- Bank account details
- Bank confirmation letter for the account
These documents ensure compliance and verification for smooth processing on the platform.
Advantages of TReDS
- Enables MSMEs to access working capital at competitive rates
- Speeds up the receivables financing process with minimal paperwork
- Reduces dependency on traditional lending channels
- Provides transparency and security via electronic auction
- Helps MSMEs improve credit rating and business reputation
Conclusion
TReDS is a vital digital platform that supports MSMEs in managing their trade receivables efficiently, enhancing liquidity and operational efficiency. If you’re an MSME planning to scale your business or invest in working capital, exploring a business loan can provide the necessary financial support alongside TReDS benefits. Check your pre-approved business loan offer to efficiently manage costs related to expanding your operations or improving cash flow.
