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
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
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
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
- 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.