Why deep-tier financing matters
By Sundeep Mohindru, Founder & Promoter, M1xchange
India’s MSME sector is central to the country’s economic growth, but timely access to working capital remains a persistent bottleneck. Delayed payments are one part of the problem. For many smaller businesses, access to finance also depends on where they sit in the supply chain.
Consider a small manufacturer supplying components to another medium-sized business. The transaction may be genuine and supported by an established business relationship, but the receivables can remain outside established formal financing channels. Unlike invoices issued to large corporates, receivables from smaller MSMEs may have fewer avenues for structured financing.
India has made meaningful progress in formalizing receivables-based financing through the Trade Receivables Discounting System (TReDS). The platform enables MSMEs supplying large corporates and government entities to access working capital against eligible receivables. However, supply chains do not stop at Tier-1. Tier-1 MSME suppliers also sell to other smaller...
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