As the title reads, all MSMEs who have successfully obtained their registration under Udyam Registration or Udyog Aadhar Registration are requested to register under the Trade Receivables Discounting System (TReDS)
The first question that comes to anyone's mind is what exactly is TReDS?
Under this scheme, the MSMEs who have receivables from Corporate buyers, Government departments, Public sector undertakings and other buyers are eligible to obtain finance in lieu of the amount receivable from such buyers. In simple words, this scheme facilitates financing to MSMEs on the basis of their debtors. Due to uncertain market conditions, many times invoices are pending to be paid and due to this delay, many MSMEs lose out on opportunities which might be standing at their doorstep only because of the incapacity to finance their requirements. The government wants to resolve this conflict the MSMEs face and help them grow steadily and in a sustained manner.
Another way of looking at such a system is that it makes collateral free capital available for MSMEs using their business history. There are various such benefits of TReDS which we will discuss further:
Funds Access made easy
With this system MSMEs which normally face a lot of hurdles to receive capital infusion have an easy access to such funds. No need to go through the tedious process of bank audit in order to get a loan. If your business is genuine and your efforts are genuine the government wants to recognize the same and help you get access to that capital money which will help you undertake more business which comes your way. Any genuine efforts towards business growth will not go unnoticed or in vain under this new system.
Paperless system
The new system aims at making the entire process paperless and seamless by implementing an online approach. All records including MSME information and application information are to be made online using the platforms which are partnered with the system implemented by the Ministry of MSME and approved by the RBI.
One platform for everyone
Whether you are the buyer, the seller or the financier you all meet at a single platform. The TReDS is a one stop solution for everyone, be it the buyer, the seller or the financier. Anyone can use the system and avail their respective share of benefits.
Online Transaction
The funds are approved online, disbursed online and the repayment options are also made available online. The MSME entrepreneur need not visit any bank or any government office. This is aimed at reducing face-to-face interaction in order to eliminate corruption.
Discount rates that are competitive
As the platform gives equal exposure to everyone, the financiers want to lure you to obtain their financing. In doing so due to the transparent system that TReDS is it makes the financiers give more discount than what you would get by directly approaching them. It is a competitive market and financiers will try to do their best to match to your requirements.
Seamless Data integration
With the completely online system the information about MSMEs, their buyers and the financiers is synced with each other seamlessly. Any update in one system is automatically updated with allied systems in the MSME framework. This enables to obtain accurate information and get the best solutions.
Standardization
The practices followed under the TReDS are set as per the policy formulated by the Ministry of MSME. A standardization approach has been obtained to make sure data and systems across parallel platforms function in sync with each other and there is no compromise in the quality of services. This helps the MSMEs to use the same processes on any platform.
The TReDS is a win-win for the MSMEs, the buyers, and the financiers
- • Activities under NIC Code 92 which include activities of Gambling and betting activities will also not be covered the new scheme.
- • The buyers or corporates save by being able to get improved quotes and options to avail easier financing terms with their vendors.
- • The financers get ready-made data on MSMEs and their business strength thus helping them to build a strong asset portfolio by financing good MSMEs at competitive rates.
The Ministry of MSME with necessary approval from the RBI has appointed the below portals to implement the Trade Receivables Discounting System – TreDS
