Unlock your trade receivables and improve business cash flow with professional TReDS Registration and Financing assistance from CORPADDA.
The Trade Receivables Discounting System (TReDS) is an electronic platform designed to facilitate the financing and discounting of trade receivables of Micro, Small and Medium Enterprises (MSMEs) through multiple financiers.
TReDS enables eligible MSME suppliers to obtain early payment against invoices raised on corporate buyers, Government Departments, and Public Sector Undertakings. Instead of waiting until the normal invoice due date, an eligible invoice may be financed through the TReDS platform.
At CORPADDA, we assist MSMEs and corporate buyers with TReDS registration, onboarding documentation, platform coordination, invoice financing processes, and related support.
Regulatory Framework of TReDS
TReDS operates under the regulatory framework of the Reserve Bank of India (RBI).
The RBI issued guidelines for setting up and operating TReDS as an institutional mechanism for financing MSME trade receivables through an electronic platform.
TReDS platforms function as authorised payment system operators under the applicable framework of the Payment and Settlement Systems Act, 2007 and RBI's regulatory requirements.
The framework is designed to bring together MSME sellers, buyers, and multiple financiers on a common electronic platform for transparent and competitive financing of eligible trade receivables.
The TReDS framework facilitates financing of both invoices and bills of exchange.
Mandatory TReDS Onboarding for Certain Companies
Under the applicable Government notification, companies registered under the Companies Act, 2013 having turnover exceeding ?250 Crore, and Central Public Sector Enterprises (CPSEs), are required to onboard on TReDS platforms.
The turnover threshold was reduced from the earlier limit of ?500 Crore to ?250 Crore.
The requirement is intended to increase participation of large buyers in the TReDS ecosystem and facilitate access to receivable financing for MSME suppliers.
Who Participates in TReDS?
The TReDS ecosystem primarily consists of three participants:
1. MSME Seller
The MSME supplies goods or services to a buyer and raises an invoice.
The seller may initiate the process of financing the trade receivable through the TReDS platform.
2. Buyer
The buyer may be a corporate entity, Government Department, Public Sector Undertaking, or other eligible buyer.
The buyer accepts or confirms the invoice / factoring unit on the TReDS platform.
3. Financier
Financiers may include eligible banks, NBFC-Factors, and other financial institutions permitted under the applicable RBI framework.
Multiple financiers may participate and submit financing bids against eligible factoring units.
How Does TReDS Work?
The TReDS financing process generally works as follows:
Step 1 – Supply of Goods or Services
The MSME seller supplies goods or services to the buyer in the ordinary course of business.
Step 2 – Invoice Generation
The MSME raises an invoice on the buyer for the goods supplied or services rendered.
Step 3 – Creation of Factoring Unit
The invoice or bill is uploaded on the TReDS platform and a Factoring Unit (FU) is created.
The factoring unit represents the trade receivable proposed for financing.
Depending on the transaction structure, the factoring unit may be created by the MSME seller or the buyer.
Step 4 – Buyer Acceptance
The buyer verifies and accepts the factoring unit on the TReDS platform.
Buyer acceptance confirms the underlying trade receivable for the financing process.
Step 5 – Bidding by Financiers
Eligible financiers registered on the TReDS platform may submit bids for financing the accepted factoring unit.
The bids may contain the applicable discounting rate and financing terms.
Step 6 – Selection of Financing Bid
The eligible participant selects or accepts a suitable financing bid in accordance with the platform process.
Competitive participation by multiple financiers may help provide market-based discounting opportunities.
Step 7 – Payment to MSME Seller
After completion of the financing process, the financier provides the discounted invoice amount to the MSME seller.
The MSME therefore receives funds before the original invoice due date.
Step 8 – Payment by Buyer on Due Date
On the invoice due date, the buyer makes payment to the financier through the prescribed settlement mechanism.
The transaction is settled in accordance with the TReDS platform and payment system framework.
Our TReDS Registration and Financing Services Include
- TReDS Applicability and Eligibility Assessment
- Mandatory TReDS Registration Applicability Review
- TReDS Platform Onboarding Assistance
- MSME Seller Registration Support
- Corporate Buyer Registration Support
- KYC and Documentation Assistance
- Udyam and Business Document Review
- Authorized User and Signatory Assistance
- Platform Agreement and Onboarding Coordination
- Buyer-Seller Mapping Support
- Invoice / Factoring Unit Process Assistance
- Buyer Acceptance Process Support
- Invoice Discounting and Financing Coordination
- Transaction Follow-up Assistance
- TReDS Process and Compliance Support
At CORPADDA, we assist MSMEs and corporate entities in understanding the TReDS framework, completing platform registration, organizing onboarding documentation, and navigating the trade receivable financing process.