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M1xchange Revolutionises Financing for Small Businesses

By Margvi Aggarwal --
Monday, 30 Oct, 2023

The first and most successful trade receivable platform in India, M1xchange, has extended the capabilities of TReDS (Trade Receivables Discounting System) to allow invoice financing for commercial transactions involving small businesses, particularly those involving SME buyers and SME sellers. The goal of this extension is to give MSME (Micro, Small, and Medium Enterprises) vendors on the TReDS platform cash-flow based finance.

The "M1xchange Small-Small" service acts as a one-stop, plug-and-play platform for small MSME sellers on TReDS that provides cash-flow based financing. It was tested with the theme of "MSME Lending" in the Reserve Bank of India's Third Cohort through the Regulatory Sandbox (RS). The RBI has declared it to be viable.

One of the primary advantages of this new facility is that it allows MSME purchasers to use cash flow-based credit analytics instead of the conventional method to risk assessment, which is based on balance sheets. Digital credit analytics is used in this facility. It is made possible by a credit analytics engine (CAE), which uses information from various internet sources, including bank statements, the GSTN (Goods and Services Tax Network), TReDS transaction data, and more. The CAE allows banks to apply their own business regulations and risk policies to qualify each MSME while also evaluating the MSME's ability to repay and intend to pay.

Using its technological prowess, M1xchange developed an engine to gather financial data on SMEs from a variety of reliable sources, such as the Account Aggregator framework, and distribute processed analysis. Banks save time and MSME firms have an easier time onboarding and data collection for credit analysis thanks to this digital method. Furthermore, several banks can access this data simultaneously, saving each bank from having to perform the same tasks twice.

M1xchange Revolutionises Financing for Small Businesses. The first and most successful trade receivable platform in India, M1xchange, has extended the capabilities of TReDS (Trade Receivables Discounting System) to allow invoice financing for commercial transactions involving small businesses, particularly those involving SME buyers and SME sellers. The goal of this extension is to give MSME (Micro, Small, and Medium Enterprises) vendors on the TReDS platform cash-flow based finance.

The "M1xchange Small-Small" service acts as a one-stop, plug-and-play platform for small MSME sellers on TReDS that provides cash-flow based financing. It was tested with the theme of "MSME Lending" in the Reserve Bank of India's Third Cohort through the Regulatory Sandbox (RS). The RBI has declared it to be viable.

One of the primary advantages of this new facility is that it allows MSME purchasers to use cash flow-based credit analytics instead of the conventional method to risk assessment, which is based on balance sheets. Digital credit analytics is used in this facility. It is made possible by a credit analytics engine (CAE), which uses information from various internet sources, including bank statements, the GSTN (Goods and Services Tax Network), TReDS transaction data, and more. The CAE allows banks to apply their own business regulations and risk policies to qualify each MSME while also evaluating the MSME's ability to repay and intend to pay.

Using its technological prowess, M1xchange developed an engine to gather financial data on SMEs from a variety of reliable sources, such as the Account Aggregator framework, and distribute processed analysis. Banks save time and MSME firms have an easier time onboarding and data collection for credit analysis thanks to this digital method. Furthermore, several banks can access this data simultaneously, saving each bank from having to perform the same tasks twice.