Invoice Discounting for Retail Investors

These days, alternate financing options such as invoice discounting are increasingly becoming popular as they help businesses fulfil their short-term obligations. These financing options have made it easier for smaller businesses to fund their growth and expansion. Facilitated by the rise of fintech services, invoice financing is gradually becoming an attractive investment option in India.

Now, retail investors are exploring this alternative investment option to gain optimum returns quickly.

How Does Invoice Discounting Work?

Before we explore the low-risk investment in the short term, let us understand how this financing option works:

• First, a business purchases a product or a service from a B2B seller.
• Then, the seller/supplier sends an invoice for this purchase to the customer and specifies a time frame within which the latter needs to pay.
• This seller approaches a third-party lender (a fintech service provider) and uses the unpaid invoice as collateral to raise funds.
• The lender verifies all the documents and issues a certain percentage of the invoice amount as credit as per agreed-upon terms and conditions.
• When the business buyer ultimately makes a full payment against the invoice, the excess amount is returned to the seller after deducting applicable charges.

KredX is a leading invoice discounting platform in India which helps businesses leverage their unpaid invoices for fulfilling working capital requirements. Their customised finance solutions help businesses maintain their cash flow and control every aspect of operations.

How Can Retail Investors Invest in Invoice Discounting?

Traditionally, formal financial institutions such as banks engaged in invoice discounting, and only large companies could access this facility. Nowadays, many fintech platforms are offering opportunities for not just the MSME sector but also for retail investors.

Fintech companies that offer invoice discounting help connect businesses with retail investors. KredX is a reliable fintech platform that acts as a bridge between businesses and investors seeking high returns within a short period.

Let us look at the steps how an investor can make money by offering working capital to businesses:

• First, the investor has to register with an invoice discounting platform.
• When businesses approach the fintech platform with unpaid invoices, retail investors can provide them instant money and receive returns within 30 to 90 days of the initial investment

Note: The minimum investment is Rs 3 Lakh on the KredX platform.

Crucial Tips for Retail Investors

Listed below are essential points for retail investors to consider:

• First, it is vital to be aware that investors and suppliers have to pay certain fees because of legal documents, operational charges and deal processing charges.
• It is crucial to select an appropriate invoice discounting platform. One can check financial reports, credit history, IRR (internal rate of return) and details of shareholders before investing.

KredX is India’s largest supply chain financing solution provider. We help businesses unlock the potential of their unpaid invoices and receive money in no time.

Bottom Line

Invoice discounting is an important alternative financing option that helps businesses in fulfilling their short-term capital needs. While it was a popular financing option among MSMEs, many retail investors have also realised its potential. As a result, the number of investors registering with fintech platforms to make money is rising steadily.