What is Invoice Discounting?

Invoice discounting is the practice of using a company's unpaid invoices to raise working capital & fulfil its financial needs. Traditionally, financial institutions including banks and NBFCs have been discounting invoices for MSMEs. Invoice discounting involves transfer of rights on an asset (invoice) from the seller (i.e. business) to the financier (i.e. investor) at an agreed value.

How does it work?

MCRED provides a marketplace/platform for business owners to sell and investors to purchase invoices raised on blue chip companies. It combines the best in class technology experience with credit underwriting & data analytics capabilities to create a brand new investment asset class. Business-owners looking for an advance on their invoices, raised against blue chip/creditworthy institutions, can use our platform to sell these unpaid invoices at attractive rates.

Register yourself with us on our website as a business and we will help you sell your invoices at competitive rates.

What are the eligibility criteria for businesses?

Any business that supplies goods/services to large blue-chip companies can avail the bill discounting services provided by MCRED. Eligibility and amount of discounting is governed by the creditworthiness of the business and therefore they should be willing to share their financial information and other related documents.

Does MCRED have an upper sanction limit?

We have no upper limit for sanctioned amounts for your invoices and it is solely dependent on the business’s requirements. The upper limit depends on the business requirement and the eligibility as per MCRED’s criteria.

What is the maximum invoice discounting tenure?

Mainly we provide a short-term investment facility to our investors, most of the invoice on platform offer tenures upto 90 days as of now.

Will MCRED’s invoice discounting facility affect my balance sheet?

No. We offer a zero-liability bill discounting service. Since the working capital is availed using invoices, it bears no impact on your balance sheet.

Who can invest with MCRED?

• Individual resident investors • HUF / Proprietorship registered in India • Institutional investors • Banks, NBFCs and other Financial Institutions • NRI investors (Provided you have an NRO account and comply with basic predefined KYC guidelines, i.e., PAN card and valid Indian address proof)

Is there a minimum amount for investment?

As of now you can invest a minimum of INR 3 lakhs per deal. This has been set to ensure that you have sufficient liquidity to invest in an alternative investment class and the required risk appetite for the same.

How can I become a member of MCRED?

Signing up on MCRED is simple. Simply provide your contact details on our website and our relationship managers will contact you to complete the registration process. As a part of our KYC norms, we will need a small set of documents to ascertain your investor's status. Once those documents are received and vetted, you will receive an email from us notifying you of your account post successful onboarding.

What kind of returns can I expect as an investor on the MCRED platform?

MCRED does not play a role in deciding the discount rates of the invoices. The returns on your investment will be governed by market forces based on demand and supply economics. Expected yield corresponding to deals will be made available to investors before any purchase, this ensures that investors know their returns before initiating the fund transfer.

Does MCRED guarantee my returns?

MCRED provides a technology platform to connect sellers of invoices and investors and execute transactions between them. MCRED provides certain tools, for example - credit report of the seller, enterprise report (blue-chip company) among others - to make a calculated investment decision.

MCRED does not guarantee any fixed return to its investors and the investment would be subject to the traditional market risk associated with invoice discounting. Please refer to the various reports made available on the platform during deal purchase for details.

Do I have to fund the entire invoice amount?

No, as an investor, you can decide on the amount you would want to invest in any invoice. You can either fund partially or fully an invoice.

What is the tenure of investment?

Tenure of the investment is linked to the invoice payment date. Every invoice will have a different maturity period. We have seen that historically it has ranged from 30 days to 90 days.

Why should I invest through MCRED?

Invoice Financing is a very niche product in the asset-based financing arena. It carries minimal undue risk while generating superior return on investments. In advance economies, it has emerged as a major form of investment. MCRED's Invoice Financing platform ensures a higher short-term yield for its investors. Our conservative and ever evolving risk management policies minimizes the risk of investing for our investors. Our experience in MSMEs financing space helps us in catering only to the lowest risk segment within the space.

What happens in case the invoice is not paid by the company?

We have an established due diligence process in place backed by manual verification of the parties. We are also very selective in choosing the people with whom we do business.

The borrowers are obliged legally to pay back the amount owed to the investors irrespective of whether the invoice is paid by their customer. In the remote case of a default by the customer, we will facilitate legal help for them and will provide assistance in recovering the loss. We have also tied up with various collection agencies to recover the amount due from the business in case of default.

What is the risk involved?

Any investment comes with its own associated risk. The risk could be total capital erosion. However, we have taken several steps to mitigate the risk – both strategically and operationally:
• Comprehensive risk management framework – Detailed credit analysis of sellers and their financials at onboarding
• Verification process - Invoices are verified physically. Moreover, invoices are restricted to only blue-chip companies.
• Strong legal framework – All sellers are required to sign our legal agreements to ensure our investors are well protected.
• If a blue-chip company does not pay the invoice money in the future – the small business is still liable to pay the money owed to the investor.
• If the small business collapses, the blue-chip company would still pay the invoice
money, and this will be paid directly into the escrow account which will be transferred to the investor.
• MCRED is a tech platform and it does not assume any credit risk on behalf of the investors.

What is the risk mitigation process at MCRED?

The MCRED business model is one where investors do not face any execution risk. Our credit risk analysis system takes place at multiple stages.

Business-Onboarding Stage / Evaluation Stage:

We follow a three-pronged approach that is dependent upon the business, the enterprise and their relationship to arrive at a MCRED Score for every business

- Credit Credentials
- Financial Health & Stability
- Credit Rating
- Fundraising Ability
- Liquidity
- Market Intelligence
History of working relationship between Business & Entity

Post Evaluation Stage

Legal mechanisms such as undertakings, bills of exchange, review of legal proceedings and Board for Industrial and Financial Reconstruction (BIFR), etc. involving the vendor and the enterprise.

Invoice Listing Stage& Financing Stage

Verification of each invoice before listing them on the platform. MCRED monitors the security of every transaction through Escrow Accounts for both Businesses and Investors, separately.

In addition to this, all the important data points after evaluation by the MCRED risk team are summarised in different reports at the vendor, enterprise and deal level.