In a strategic move to address working capital challenges faced by Micro, Small, and Medium Enterprises (MSMEs), Red Fort Capital Finance Company, an NBFC lender, has launched its invoice discounting solution. This financial mechanism enables businesses to sell their outstanding invoices to a third-party financier, like a bank, at a discounted rate, facilitating swift access to working capital. The financier subsequently recovers the full amount from the customer upon the invoice’s maturity.
Empowering MSMEs with Flexible Funding
Parry Singh, Chairman and CEO of Red Fort Capital, expressed the company’s commitment to supporting the growth of borrowers, particularly in the current challenging business environment for small enterprises. The newly launched Invoice Discounting solution aims to empower businesses by offering quick and flexible lending options tailored to their unique requirements.
Documentation Requirements and Eligibility Criteria
MSMEs seeking Red Fort Capital’s invoice discounting solution need to provide essential documents such as invoices or purchase orders, details of the top 10 customers and their yearly sales, bank account statements for the last two years, monthly GST returns for the previous two years, KYC documents, audited financials, ITR returns for two years, sales ledger for the last one year, and collateral sale deed for secured lending. All sectors, except construction and education, are deemed eligible for invoice discounting, according to Red Fort Capital.
Recent Funding Initiatives by Red Fort Capital
Earlier this year, Red Fort Capital secured term loans of Rs 7.5 crore from IKF Finance and Rs 4 crore from Usha Financial Services for MSMEs. Specializing in secured business loans ranging from Rs 1 crore to Rs 10 crore, the NBFC aims to provide critical financial support to the MSME sector.
RBI’s Recent Measures and FIDC’s Caution
While the Reserve Bank of India (RBI) increased risk weights for various types of lending, including consumer credit, NBFCs have raised concerns about the potential adverse impact on credit flow to MSMEs. The Finance Industry Development Council (FIDC) has urged the central bank to reconsider these measures, emphasizing the potential negative consequences for MSMEs, self-employed individuals, and other sectors reliant on credit from NBFCs.
