Factoring on M1xchange TReDS: A smarter way to manage Working Capital

In today’s fast-paced business environment, maintaining liquidity is critical for enterprises of all sizes. For MSMEs especially, timely access to working capital can be the difference between sustained growth and financial strain. One effective solution that addresses this challenge is factoring; a form of invoice financing that provides early payment against approved invoices. And when factoring is done on an RBI-licensed TReDS platform like M1xchange, it becomes more transparent, compliant, and credit-efficient.

What is Factoring?

Factoring is a financial transaction where a business sells its accounts receivable (invoices) to a financier at a discount. In return, the business receives an upfront payment, allowing it to maintain healthy cash flows without waiting for customers to pay on the due date.

This early payment helps businesses manage operations smoothly—whether it’s paying suppliers, fulfilling orders, or meeting payroll.

Factoring on M1xchange TReDS: How it works

M1xchange facilitates invoice discounting through its Trade Receivables Discounting System (TReDS) platform, regulated by the Reserve Bank of India. The process on the platform is fully digital and can be completed in a few simple steps:

1. MSME Uploads the invoice
2. The buyer (corporate or MSME) accepts an invoice raised by the supplier.
3. Financiers (banks, NBFCs, etc.) bid on the invoice, offering the best discounting rates.
4. The supplier selects a best bid from financier and receives payment in 24 hours.
5. On the invoice due date, the buyer makes the payment directly to the financier.

This process ensures that MSMEs receive timely funds, while buyers can support their vendors without impacting their own working capital cycles.

Key advantages of factoring on M1xchange

• 100% digital, Paperless execution: The entire transaction, from invoice upload to fund disbursal, is conducted online through M1xchange’s secure platform. No paperwork, no running bank to bank.
• Off-Balance Sheet credit: Since the financing is done against accepted invoices and not loans, it does not appear as debt on the supplier’s balance sheet. This improves financial ratios and borrowing capacity.
• No collateral required: Unlike traditional bank loans, factoring on M1xchange does not require MSMEs to pledge assets. The strength of the buyer’s creditworthiness drives the transaction.
• Competitive rates through bidding: Multiple financiers participate in real-time bidding, ensuring that MSMEs get the best possible discounting rates.
• Enhanced supply chain relationships: Buyers can strengthen relationships with their suppliers by enabling faster payments. This often leads to better terms, timely delivery, and long-term partnerships.

Who can use it?

• Suppliers (MSMEs) looking for early payment against their receivables.
• Buyers (corporates or large MSMEs) who wish to help their vendor ecosystem without using their own working capital.
• Financiers seeking a low-risk, transparent way to finance trade receivables.

Driving MSME growth through factoring

Factoring on M1xchange TReDS is not just a financing tool, it’s a way to build trust, unlock working capital, and strengthen India’s supply chain ecosystem. By offering collateral-free liquidity and off-balance-sheet benefits, it provides MSMEs with the flexibility to grow, invest, and scale, especially in Tier 2 and Tier 3 markets.

As India’s leading TReDS platform, M1xchange continues to simplify credit access through digital innovation, regulatory compliance, and a robust network of financiers.