Factoring Receivables on an Exchange/ Trade Finance/Working Capital Finance

TREDS Platform

TReDS platform enables factoring of MSME invoices by financiers and eventually settles the invoice amount with the buyer on due date.

TReDS –  process flow:

  •  Upon receiving PO (Purchase Order) from the buyer, MSMEs deliver the goods and generates a ‘factoring unit’ (e-record of invoice details) on TReDS.
  •  The buyer should verify and accept the factoring unit created by MSME seller on the TReDS platform.
  •  Based on the buyer’s profile, TReDS predefines time frame for financiers to offer their bid for the factoring unit. The amount quoted by financiers is visible only to the MSME, who can choose and accept any favourable bid.
  •  As and when an MSME accepts the bid, the factoring unit is tagged as ‘financed’ and financiers are notified. The discounted bill amount gets deposited in the MSME’s account on T+1 or T+2 basis (one or two business days after acceptance based on the platform).

 Factoring of Receivables - Traditional Model

Receivables Financing by Drip Capital

Bill discounting platform  focussed on SME exporters

Digital trade finance firm Drip Capital sees strong growth opportunities for its export factoring solutions to small and medium businesses in India, according to co-founder and co-CEO Pushkar Mukewar.

“There is massive market opportunity given that 50 per cent of exporters in India need some form of working capital solutions. We will continue to target SMEs who are into exports from India. A big part of our strategy is going to be international expansion into markets that have dynamics like India and Mexico,” he said.

Drip Capital provides unsecured collateral-free working capital solutions to small and medium sized exporters in emerging markets and has offices in Palo Alto, Delhi, Mumbai, Bengaluru and Mexico City.

Currently, it does not support transactions within India. ”We only do cross-border trade receivables as opposed to TReDs, which is focused on domestic receivables”, he added.

Over time, Drip Capital would like to develop products for imports as well. There is lot of potential in India itself, he said.


Mukewar said that onboarding of SMBs into digital platforms like Drip Capital still requires some hand-holding. But most of them are pretty comfortable doing digital once they are on boarded, he said. Many SME clusters in tier 3 and 4 cities are at ease with digital tools and platforms for their export financing needs, he added.

Asked about the reforms that are needed in factoring, Mukewar said that there is a need to encourage more independent factoring companies to come into the market. Currently, entry into the factoring business is licensed and one has to get RBI registration as an NBFC to undertake this activity.