ABC Industries (name changed to maintain confidentiality) is a three-decade-old company and a leading automotive components manufacturer with manufacturing facilities in India and abroad. In India, the organization supplies to large automobile manufacturers and has an MSME supplier base across 40 manufacturing locations in the country.
As part of the contract, the company has agreed to make the payments against MSME invoices within 45 days of order delivery. ABC Industries enjoys a good corporate credit rating, so its MSME suppliers are assured of timely payments. However, the company oen receives requests for early payments from its MSME suppliers. At times, to maintain a healthy relationship among its suppliers, the corporate releases the payment as early as possible. As an effect, this decision hampers their monthly projections and working capital. Its MSMEs often take the help of traditional factoring for invoice discounting of its MSMEs invoices, but it involves a lot of paperwork and payment takes approximately 7-10 days to reach the MSME supplier. ABC industries understand the value of working capital for their MSMEs to keep the production up and running, but also does not want to overburden its finance team with the required paperwork for every factoring transaction as well.
