TReDS is an institutional mechanism set up in order to facilitate the financing of trade receivables of MSMEs from corporate buyers through multiple financiers. MSMEs, despite their important role in the Indian economy, MSMEs continue to face constraints in obtaining adequate finance, particularly in their ability to convert trade receivables into liquid funds. In order to address this issue, the Reserve Bank of India granted approval to three applicants to set up and operate TReDS.
- MSMEs get greater access to finance.
- Corporates save on procurement cost through an improved negotiation of financing term for its vendors.
- Financiers get an opportunity to build PSL asset portfolio on Trade Receivable Exchange platforms like M1xchange.
Mynd Solutions’ TReDS platform, M1xchange, allows MSMEs to upload their receivables to the system and get them financed. This not only gives them greater access to finance but also puts greater discipline on corporates to pay their dues on time. Further, as the underlying entities are the same (MSMEs and corporate buyers) Mynd's TReDS deals with both factoring as well as reverse factoring so that higher transaction volumes come into the system and facilitate in better pricing.
Onboarding M1xchange the Corporates enjoy savings on procurement cost through an improved negotiation of financing term for its vendors. Moreover, the Corporates save on the financing cost by extending their credit period and augmenting their payment cycle. Being a completely digital platform the transactions are 100% transparent and the overall administration cost for vendor financing, payments and settlements are significantly reduced lowering the overall cost of trade. M1 enables the Corporates to have access to multiple financiers on a single platform.
The Financiers, on the other hand, have an opportunity to build PSL asset portfolio through M1. The requirement of minimum documentation elevates the ease of operation with the facility to make a better decision through the availability of key information of Suppliers and Corporates.