Invoice Discounting Investment: What Is It and How to Invest

Today, several investors are looking for alternative investments to diversify their returns. These investments have little correlation with the broader market, so they can maintain their values even in market downturns. 

Some fintech platforms allow investors to offer credit directly to trustworthy businesses. Invoice discounting is one such credit facility where investors can directly offer credit. This serves as a short-term investment opportunity which can generate high returns. 

Now, let us explore essential details regarding this new investment option.

What Is Invoice Discounting Investment?

Invoice discounting is an alternative financing option that helps small businesses to meet their working capital requirements. The underlying concept is making use of unpaid invoices to avail funds from third-party fintech service providers. 

Some fintech platforms allow investors to offer credit directly to vendors and enterprises against their invoices. That is invoice discounting investment. With KredX, one can get returns as high as 15% within a time frame as short as 30-90 days.

Benefits of Invoice Discounting Investments 

Let us start by exploring the benefits of investing in invoice discounting: 

• Investors can earn returns in a short period, i.e. within 30 to 90 days.
• Invoice discounting investments offer higher returns than traditional investment options such as FDs (Fixed Deposits), debt and liquid mutual funds and RDs (Recurring Deposits). 
• It helps in portfolio diversification which is necessary for mitigating risks. 
• This investment option is associated with relatively low risks. 
• Fintech service providers use advanced technology, which facilitates a smooth and hassle-free experience for investors. 

How Can Investors Invest in Invoice Discounting? 

KredX offers invoice discounting facility that connects investors with businesses needing funds. Here are the steps that help investors invest in invoice discounting via KredX:

• First, people must sign up on KredX to invest in invoice discounting.
• Then, they need to submit all the requisite documents to complete the KYC process.
• After the verification process, investors can start to invest in their preferred invoices. 
• They will receive returns directly in their bank accounts on the stipulated date. 

Investors can track their investments easily via the KredX Invest App. We offer a 360-degree credit risk analysis system which helps people invest confidently and efficiently.

Crucial Factors Related to Investing in Invoice Discounting 

Now let us discuss some of the crucial factors that will help investors: 

• First, invoice discounting is more suitable for lump-sum investments instead of small amounts. 
• Opting for the right fintech platform is of crucial importance. Investors need to assess all the details before zeroing in on an invoice discounting platform. Make sure to check the IRR (internal rate of returns), businesses’ credit history, shareholders’ details and financial reports. 
• Investors need to know whether the fintech platform charges any fee. For example, some companies charge businesses and investors to cover the expenses related to deal processing, operations and legal documents. 
• Generally, invoice discounting is more expensive than other financing options. 
• Prepayments and associated facilities are the responsibilities of the fintech service provider. 

Bottom Line

To sum up, invoice discounting is gradually emerging as a popular alternative investment option. It helps investors receive high returns for a considerably short investment period. However, financial advisers recommend checking the credentials and other vital details of the fintech platform before investing. 

Frequently Asked Questions

• How much returns will I receive if I opt for KredX for investing in invoice discounting? 

Investors can get returns of up to 20% per year if they opt for invoice discounting investments with KredX . Moreover, investors receive the benefit of reduced risks.

• Is invoice discounting safe and legal?

Invoice discounting is entirely safe and legal. RBI (Reserve Bank of India) regulates invoice discounting platforms under the Payments and Settlement System (PSS) Act, 2007.