Most Indian SMEs lack requisite liquidity to acquire goods or raw materials to fulfill more export orders, however, foreign buyers demand some credit period which means the business’ working capital will be tied up in invoices for a long time. Working Capital Finance is short-term solution that helps businesses to manage their funding requirements until the time they receive the payment from their foreign buyers. Bill Discounting, which is also known as Invoice Discounting or Invoice Factoring, is a form of working capital finance solution provided by Drip Capital for exporters. To discount the bills, an exporter can submit the invoice to Drip Capital, and 80% of its value will be financed within 24 hours. This facility is completely unsecured, i.e. it does not require any form of hard collateral unlike conventional working capital solutions served by banks. To make this process as brief and hassle-free as possible, Drip Capital provides an online platform where exporters can upload these invoices and we will be notified right away about your working capital requirements. The remaining 20% (minus the discounting fees and interest charges) of the invoice value will be disbursed at the end of the credit period when the foreign buyer clears its dues.
Bill Discounting is a good fit for your working capital finance needs if you are facing these issues - you have exhausted or are unable to obtain credit limits from banks due to lack collateral or tedious processes, your buyers are demanding a longer credit period but agreeing to this means you’ll face a cash crunch, and more leads for export orders are lined up but you are unable to serve them as you lack the resources and finance. A collateral-free and speedy working capital solution like Bill Discounting can be a big support in growing your export business’s sales as it fuels cash flow which is the lifeline of any growing export business.
Understanding a bill discounting service is best explained with an example;
Let's assume Bharat Hardware enters into an exclusive supplying deal with Hindustan Contractors for supplying 1,000 units of an equipment at Rs 100 each. This brings the total value of the transaction at Rs 100,000.
Both the parties agree on a 30% pre-payment with the rest of the 70% payable after 30 days of receiving the goods.
Since Bharat Hardware wishes to forge an on-going trade relationship with Hindustan Contractors, they proceed with the deal and the goods are received by Hindustran Contracts on the due date.
As per the terms of the bill discounting contract, Bharat Hardware will now have to wait 30 days to receive the pending Rs 70,000. This amount could have been used to pay for the raw materials required to work on the next order.
In cases like these, Bharat Hardware can simply pledge this future receivable to a bank or a financial institution that is offerring the bill discounting solution and receive a loan against the amount.
At the due date, the company can simply pay back the bank with the nomnimal interest rates and processing fees.
Buyers & Suppliers
Learn about how we’ve 10xed exporters
Exporter of Plastic products from Maharashtra
We started factoring our export invoices with Drip in FY17-18 and by 18-19 we were getting almost 25% of our invoices financed by them. With the boost in working capital and increased competitiveness in foreign markets because of better terms of sale, our turnover has shown a substantial increase.
Exporter of frozen foods from Andhra Pradesh
As an exporter you may have a great offering, but without easy access to short-term finance, you face challenges in scaling and have to let go of many opportunities. Drip Capital’s easy and efficient export finance solution has helped us ensure there is continuous cash flow in our business. Now we can convert possibilities which we otherwise would have passed on. The result has been a 220% jump in sales in FY19.
Exporter of Red chillies from Andhra Pradesh
When we started our business in 2017, traditional lending institutes could not keep up with the increasing orders from our buyers. With Drip capital fulfilling our working capital requirement, in FY 19 our business reported massive growth as compared to the previous year, over 50% of those export invoices were financed by Drip.
Exporter of Basmati Rice from Punjab
Drip’s factoring service has ensured that our liquidity doesn’t remain tied up in invoices for a long time. Since the start of our collaboration, we have been able to cater to more buyers and our export turnover has increased 4x between FY17-18 and FY18-19.