Invoice discounting gives double the fixed return than FD, this is how you can invest

In the invoice discounting process, the unpaid invoices of the company are sold to banks, NBFCs or investors (on invoice discounting platforms) at partial value, which gives an average fixed return of 12-14% per annum. Let us understand how the company benefits from this and how investors can make profits.

It is often heard that to get higher returns it is necessary to invest for a long period. While this is not true, some investment options are exceptions to this. Invoice discounting is one of them. In this, you can earn higher returns for a shorter investment period. So let's understand what invoice discounting is and whether you should invest in it.

How does this option work?

Invoice discounting process involves selling the unpaid invoices of the company to banks, NBFCs or investors (on invoice discounting platforms) at partial value, which gives an average fixed return of 12-14% per annum.

The concept of invoice discounting works towards solving the working capital problem of start-ups, micro, small and medium enterprises (MSMEs). When these companies sell goods to big companies (blue chips) and raise invoices, they have to wait till the credit period ends to get the payment. The credit period can range from 30 to 120 days. If start-ups and MSMEs wait this long to get the payment, their business may suffer as they need constant money to grow the business.

Companies get this benefit

To meet this need, companies raise money from the market based on that invoice, which immediately solves their cash problem. Currently, platforms like Giraffe, CredEx, Tyke, TradeCred, Leaf Round offer invoice discounting as an investment product to their retail investors. They act as a middleman between fintech companies (who want discounts on their invoices) and retail investors (who want to fund them and earn profits).

If you are thinking of investing in it, then make it a habit to keep these things in mind from today itself.

The investment period usually ranges from 30 to 120 days.

Returns usually range from 11 to 18% IRR.

In this you can invest from Rs 10,000 to Rs 1,00,000.