Accelerate Business Growth With Bill Discounting

The Micro, Small, and Medium Enterprises (MSME) form a major chunk of the Indian economy generating massive revenue and contributing heavily to the nation’s GDP. Touted as the growth engine of the nation, the MSME sector acts as a catalyst, contributing 40% of the nation’s export, generating employment, and sustaining livelihoods. Currently, there are more than 50 million MSMEs functioning in India – a staggering 95% of the total industrial units in the country. Despite being considered as one of the strongest drivers of economic development and precursor of innovation, the Indian MSMEs often find themselves struggling in terms of procuring funds. The reason being the current Indian ecosystem lacks a continuous cash flow to sustain the business.

Cash management is undeniably the most significant factor in keeping any business afloat. According to the Payment Practices Barometer Asia Pacific 2019 by Atradius, an average of 39% of invoices remain unpaid at the due date. Given the current situation, the entire period of payment is postponed to a staggering 59 days. This not only limits their operational capacity but also stalls business growth due to a lack of financial reserves to take on new orders, thus undermining their very survival.

The reason for concern is not restricted to receiving payments, instead, it also involves the time these payments are received. Thus, bill discounting has turned out to be a viable option for small businesses to get quick access to working capital, ultimately keeping businesses afloat.

What Is Bill Discounting?

Bill discounting refers to the process of trading a company’s unpaid invoices to raise working capital. This type of short-term financial assistance allows businesses to get access to working capital without disturbing the cash cycle, thereby ensuring seamless business operation. Essentially, bill discounting is an activity that emerged in the early 90s to help high growth businesses gain financial support.

Benefits Of Using Bill Discounting:

Bill discounting is a process in which short-term advances are extended in lieu of unpaid sales receivables. Since the tenure is very short, it is particularly beneficial to companies looking to raise working capital without getting involved in long-term credit options.

KredX is one such bill discounting company that helps small businesses get access to working capital, thus assisting businesses to grow and expand.

Increased Cash Flow: As most of the MSMEs depend on the payment from their customer to get started with new assignments, access to quick working capital is considered a key to success. As such, bill discounting presents businesses with an option to procure working capital than applying for formal business loans. Since the bill discounting process involves using a company’s unpaid invoices as collateral, it accelerates cash inflow, ultimately benefiting the company in increasing sales, pursuing growth, procuring equipment, and more.

Speedy Access To Cash: As compared to conventional financial instruments, invoice discounting is a much faster and easier mode to get access to working capital as it doesn’t involve the stringent documentation process. It speeds up cash inflow, allowing the business to focus on growth and expansion.

No Debt Is Incurred: Bill discounting omits the business to incur any debt as a business can get cash by releasing funds locked in the form of unpaid invoices. As such, the chances of the company incurring losses are less as compared to traditional financing systems.

Zero Collateral Involved: In bill discounting, there’s no need to keep any asset (movable or immovable) as collateral. The unpaid invoice acts as a collateral.

How Bill Discounting Works?

Bill discounting or invoice discounting is the process or technique by which a company can use its unpaid invoices to raise working capital. This short-term form of borrowing helps businesses take care of their liabilities, without the need for a physical asset.

KredX is one such bill discounting company that helps small businesses get access to quick working capital using unpaid invoices at a discounted rate, thus assisting businesses to grow and expand. Here’s a quick snapshot of how bill discounting at KredX works:

Step 1: Business raises an invoice payable within 30-90 days

Step 2: Business uploads the invoice on the KredX platform

Step 3: The invoice is purchased by an external investor on the KredX platform at a discounted rate

Step 4: The approved invoice value is transferred to the business within 24-72 hours*

Difference Between Bill Discounting & Invoice Factoring:

Bill Discounting Invoice Factoring
With bill discounting, the recourse can or cannot be to/on the buyer. Whereas with invoice factoring, the recourse always has to be to/on the buyer.
In bill discounting, the business availing the service is in control of the sales ledger. In the case of invoice factoring, the service provider company has control over the sales ledger of the business.
Since bill discounting is a confidential process, the customers of the business availing the service do not get to know about the use of this facility. With invoice factoring, customers are contacted by the service provider company to collect payments on behalf of the business.
In bill discounting, the business decides the number and size of the invoices. It is useful only for a one-off single invoice.

Advantages Of KredX:

Healthy Cash Inflow Gain access to quick working capital using your unpaid invoices through invoice discounting in just 24-72 hours*
Off-The-Books KredX offers a zero-liability bill discounting service that doesn’t impact your balance sheet
Shorter Cash Cycles Receive timely access to working capital and speed up your cash cycles for business success
Business Growth Say hello to business growth and expansion with timely access to money

What Is The Eligibility Criteria?

  • Business should be at least 10 months old
  • Business should cater to at least 2 large-scale corporates
  • CIBIL score of 620 and above
  • Business should have a minimum turnover of 25 lakhs

What Are The Documents Required?

The below-mentioned documents are required for the onboarding stage

Pre-Sanction Stage*:

  • KYC of directors
  • CIBIL record of directors
  • Proof of address and PAN Card of company
  • Bank statement of the last 12 months
  • Books of account/audited financials
  • Sales data for the last 1 year
  • Loan Declaration

Post-Sanction Stage*:

  • Board Resolution
  • Post-dated cheque
  • Tri-partite undertaking involving KredX
  • Memorandum of Association and Article of Association
  • Personal guarantee letter
  • Articles of association

FAQs On Bill Discounting:

Bill discounting refers to the process of trading the bill of exchange to a financial institution at a price lesser than its actual value. This type of short-term financial assistance enables businesses to get access to working capital, thereby ensuring seamless business operation.