The Big Problem: MSMEs are tired of waiting
Cash flow is the lifeline of any business — especially for Micro, Small and Medium Enterprises (MSMEs), which often face delays in payments from large buyers. To address this challenge, the Trade Receivables Discounting System (TReDS) was introduced in India as a digital platform that allows MSMEs to sell their unpaid invoices and access working capital quickly. Regulated by the Reserve Bank of India (RBI), TReDS ensures a secure and transparent process, connecting MSMEs, corporate buyers, and financiers on a single platform.
What is TReDS? How it works?
Think of TReDS as a digital marketplace where MSMEs trade their unpaid invoices for upfront cash — legally, transparently, and without begging for loans. It’s an RBI-regulated system that lets you sell invoices to the highest-bidding financier. Yes, like a mini auction — for your own cash.
Platforms include:
- RXIL
- Invoicemart
- M1xchange
The TReDS Workflow (No Jargon, Just Logic)
Step 1: Get on the Grid
MSMEs, corporates, and financiers must register on a TReDS platform. This is a one-time process involving KYC documentation and approval.
Step 2: Upload & Chill
Once the MSME has delivered goods or services to a buyer, it uploads the corresponding invoice onto the platform.
Step 3: Buyer Says “Okay”
The buyer reviews and confirms the invoice on the platform, acknowledging that the payment will be made on the due date (typically 30, 60, or 90 days).
Step 4: Financiers Start Bidding
Once the invoice is accepted by the buyer, registered financiers place competitive bids to offer early payment to the MSME at a discounted rate. The MSME can select the most favourable offer.
Step 5: Instant Money, Minus a Tiny Cut
The selected financier transfers the discounted invoice amount to the MSME — usually within 24 to 48 hours.
Step 6: Buyer Pays Later
On the invoice due date, the buyer pays the full amount directly to the financier. This completes the transaction, with the MSME having already received its funds earlier.
The Players in the TReDS Game
| Seller | MSMEs (the invoice owner) |
| Buyer | Big companies, PSUs, gov. agencies |
| Financier | Banks & NBFCs (the money guys) |
Why MSMEs Are Loving It
- Fast-track Cash: No more 90-day waits.
- No Collateral Drama: Your invoice is the asset.
- Low Cost: Financiers compete, rates drop.
- Stress-Free Ops: Focus on growth, not chasing payments.
- Transparent & Safe: RBI backs the system. You’re good.
If You’re an MSME, TReDS is a No-Brainer
The TReDS platform is a game-changer for MSMEs struggling with delayed payments and poor cash flow. By offering a transparent and efficient mechanism to convert invoices into instant cash, TReDS empowers small businesses to stay afloat, scale operations, and compete effectively in the market.
For any MSME dealing with large buyers and long payment cycles, enrolling in a TReDS platform can be a smart move toward financial resilience.
