An MSME (Micro, Small and Medium Enterprise) in India can get early payment for its supplies through several mechanisms. Here’s how:
1. MSME Samadhaan Portal (Delayed Payment Monitoring)
Purpose: For recovery of delayed payments from buyers.
Eligibility: Registered MSMEs that have valid Udyam Registration.
Process:
File a complaint online at MSME Samadhaan Portal
The matter is referred to the Micro and Small Enterprises Facilitation Council (MSEFC) for resolution.
Legal Power: Under Section 15 to 24 of the MSMED Act, 2006, buyers must pay within 45 days. If delayed, compound interest at 3 times the bank rate is payable.
2. Trade Receivables Discounting System (TReDS)
Purpose: To get early payment against invoices through a digital platform.
Players Involved: MSME Supplier, Buyer (Corporate/Government), and Financier (Banks/NBFCs).
How it Works:
1. MSME raises an invoice on TReDS platform.
2. Buyer accepts the invoice.
3. Financier bids to discount the invoice.
4. MSME receives early payment (less discounting charges).
5. Buyer pays to the financier on due date.
Platforms:
RXIL (Receivables Exchange of India Ltd)
Invoicemart
M1xchange
3. Invoice Discounting through Banks/NBFCs
Mechanism: MSMEs can directly approach banks and NBFCs for bill/invoice discounting.
Advantage: Quick access to funds without waiting for payment from buyer.
4. Letter of Credit / Bank Guarantee
If the buyer provides a letter of credit, MSMEs can get payment upfront from their bank.
5. Factoring Services
MSMEs can sell their receivables to a factoring company at a discount.
Regulated under the Factoring Regulation Act, 2011 (amended in 2021 to include more NBFCs).