All about Bill/Invoice Discounting

 India is one of the fastest-growing economies in today's world. In today's fast-paced business world, managing cash flow is vital for the growth and sustainability of any organization. While the business is majorly relying on loans and credits for financing the other investing option is increasing rapidly in India. This financial instrument provides a quick solution for required cash for unpaid invoices and working capital. In this blog, we will be getting to know about Bill Discounting.

What is Bill Discounting?

Bill Discounting is also known as Invoice discounting or invoice factoring. It is a financial agreement where the company sells its outstanding invoices to a financial institution or a specialized third-party service provider providing immediate liquidity. The factor then advances a percentage of the invoice value to the company, usually around 80-90%, providing immediate liquidity. The remaining balance, minus the discount fee, is paid to the company once the customer settles the invoice.

What are the advantages of Bill Discounting?

 There are several advantages of Bill Discounting. Let's see them one by one.

1) Improved Cash Flow: By leveraging bill discounting, businesses can convert their accounts receivables into instant cash, eliminating the need to wait for extended periods for customers to make payments. This accelerated cash flow empowers companies to meet their working capital requirements, pay suppliers promptly, and seize growth opportunities.

2) Increase Working Capital: Bill discounting acts as a reliable source of working capital, enabling businesses to cover operational expenses, invest in new projects, purchase inventory, and bridge cash flow gap caused by delayed payments. This enhanced liquidity can foster growth and drive overall financial stability.

3) Operational Efficiency: Managing accounts receivables can be time-consuming and resource-intensive for businesses. Bill discounting streamlines the process by outsourcing the collection and management of invoices to the factor. This allows companies to focus on core operations, save administrative costs, and allocate resources toward value-added activities.

Advantages For Retail Investors

1) Short-term liquidity and cash flow management:  By participating in bill discounting, retail investors can access short-term liquidity. They can invest in invoices issued by reputable companies and receive discounted payments when those invoices are due. This can be particularly useful for investors who need to cover immediate expenses or want to take advantage of other investment opportunities without waiting for their existing investments to mature.

2) Portfolio Diversification and reduced risk: Investing in bill discounting can provide retail investors with an opportunity to diversify their investment portfolio. Bill Discounting is generally considered a low-risk investment, especially when dealing with invoices from established creditworthy companies. 

3) Predictable returns: Bill discounting often involves short-term investments with predetermined discount rates, making it easier for retail investors to estimate their potential returns. Unlike some other forms of investments that may be subject to market volatility, the return on bill discounting can be more predictable and stable.

Is Bill Discounting available in India?

Yes, Bill Discounting is available in India and you can use it using TRADECRED. It is a bill discounting company and one of India's largest fixed-income platforms. It provides easy access and very quick registration process and easy KYC. 

You can access your funds anytime and withdraw money within 2-3 days in your bank account from the wallet. If we are talking about the minimum investment then it is ₹50,000, depending on the deal. It gives you an IRR of almost 9% and more. So it seems like a good deal with having the option of quick withdrawal as you withdraw the funds just after 7 days of payment. So it is a good option to diversify your portfolio.

Are you going to invest in Bill Discounting? If yes then download TRADECRED and do comment your views in the comments.