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MSME lender Red Fort Capital launches invoice discounting for small businesses; check details

The invoice discounting mechanism involves a financing arrangement where a business sells its unpaid bills to a third-party financier, such as a bank, at a reduced rate for quick access to working capital. The financier later collects the full amount from the customer upon the invoice’s maturity.

NBFC lender to small businesses, Red Fort Capital Finance Company on Tuesday launched its invoice discounting solution to help MSMEs tide over gaps in working capital requirements. The invoice discounting mechanism involves a financing arrangement where a business sells its unpaid bills to a third-party financier, such as a bank, at a reduced rate for quick access to working capital. The financier later collects the full amount from the customer upon the invoice’s maturity. 

“At Red Fort Capital, we are dedicated to fostering growth for our borrowers, especially in the challenging landscape faced by Small Businesses. With the launch of our Invoice Discounting solution, we aim to empower businesses by providing quick and flexible lending options tailored to their unique needs,” said Parry Singh, Chairman and CEO, Red Fort Capital. 

According to the NBFC, invoices ranging between Rs 20 lakh to Rs 1 crore (unsecured) and up to Rs 3 crore (secured) are disbursed with up to 90 per cent of the invoice value in less than 24 hours.

The documents required by an MSME are the invoice or purchase order, top 10 customers and their yearly sales, bank account statements of the last two years, monthly GST returns of the previous two years, KYC documents, audited financials and ITR returns for two years, sales ledger for last one year and collateral sale deed (for secured lending). 

All sectors except construction and education are eligible for invoice discounting, as per Red Fort Capital. 

Red Fort Capital had earlier this year secured a term loan of Rs 7.5 crore from IKF Finance in Chennai and Rs 4 crore from Usha Financial Services for MSMEs. The NBFC specializes in secured business loans from Rs 1 crore to Rs 10 crore. 

With respect to lending, the Reserve Bank of India (RBI) earlier this month had increased risk weight for bank lending towards consumer credit, including personal loans from 100 per cent to 125 per cent; NBFCs’ consumer loans from 100 per cent to 125 per cent; credit card receivables from 125 per cent to 150 per cent and for NBFCs’ credit card receivable from 100 per cent to 125 per cent.