TReDS full form | What is the full form of TReDS?

TReDS

What is the full form of TReDS?

TReDS stands for "Trade Receivables Discounting System".

What is TReDS?

TReds is an electronic platform for facilitating the financing/discounting of trade receivables of Micro, Small and Medium Enterprises (MSME) through multiple financiers.

These receivables can be due from corporate and other buyers, including Government Departments and Public Sector Undertakings (PSU).

Need for TReDS

Earlier, when MSME did business with the big companies they would not get their payments on immediately or on time. They had to wait for 2-3 months or even more.

To solve this problem Government of India took an initiative and launched the portal TReDS.

Method of working of TReDS

It would be very confusing if I explain you in a simple way. So, let us understand it with an example.

Suppose a seller made some product and sold it to a buyer. Now, the buyer says that he will do the payment within 2 months.

But, as the the seller is a small company, he wants the payment immediately. There comes the need for TReDS.

In TReDS, both the seller and buyer register themselves and upload the invoice (bill) of the product.

Then, the financiers who have listed themselves on TReDS bid on the invoice and the seller selects the best bid.

Then the financier pays the amount of invoice on behalf of the buyer by taking some percentage.

Now, the situation is the seller got his payment and now he is free. The buyer gets a due date in which he had to pay 100% amount to the financier.

Eligible Entities for TReDS

Benefits to

MSME: Gets his payment on time and can reinvest to produce new products.

Buyer: Gets a due date for payment.

Financiers: Earn some percentage of the invoice.

Conclusion

This was about the full form of TReDS, what is TReDS, why it was introduced, working, eligibility, and it's benefits. Hope you liked the information.

Thank you