Clear (formerly ClearTax), fintech SaaS company, announced today that it has launched Invoice Discounting product for Enterprises, marking its foray into SME credit and B2B payments.
The Invoice Discounting product will be available to Clear’s existing 3,000-plus enterprise customers to provide working capital solutions to their suppliers and help grow their businesses, it said in a statement.
Supplier payments issues
MSMEs are the backbone of the Indian economy and having cash to grow is critical for their survival. However, it is estimated that these suppliers to Indian enterprises require credit on invoices worth over $200 billion (Rs 15 lakh crores) annually, and this need largely remains unserviced.
A study by Clear on 800-plus enterprises showed that supplier payments continue to be delayed by anywhere between 60-120 days, even after the MSME Act, 2006 which mandates MSME payments within 45 days. Invoice processing itself may take 5-20 days before payment can be released, which aggravates cash flow problems for the suppliers. Many of these suppliers are then forced to take credit from unorganized sources at unaffordable rates, since the traditional credit models rely on cumbersome application processes and heavy collateral.
This gap can be solved by tech-enabled invoice discounting, which is a form of credit where suppliers are paid early at a slightly reduced value. This form of credit is still nascent in India (0.2 percent of GDP) in comparison to other developing economies such as China (11 percent of GDP). The absence of a common platform for an enterprise, its suppliers and financiers to seamlessly process invoices for credit — is a blocker to run a successful invoice discounting program at scale. Clear’s presence in GST and electronic invoicing is best suited to address this bottleneck.
Tech-based solutions for SME credit
“We have deep experience of building fintech SaaS for enterprises which has led us to solve for the burning need of tech-based solutions for SME credit and B2B payments in the ecosystem. The tech-first supply chain financing products, starting with invoice discounting, will deliver outstanding experience for enterprises and their suppliers. ” said Archit Gupta, Founder and CEO, Clear.
Clear’s Invoice Discounting product has been designed to deliver instant working capital and liquidity to suppliers, and is expected to process $3B by the end of FY24. The smart AI/ML-based platform will connect to ERPs and enable a discount rate selection that is acceptable to both customers and their suppliers. The enterprises can choose from a range of financing options to fund their early payments: they can use their own surplus cash, or opt for line of credit via banks, or go through the TReDs marketplaces from within Clear’s platform, it said in a statement.
"We are partnering with banks and NBFCs to operationalize supply chain credit at scale by enabling quick, efficiently priced credit based on actual business performance and not just asset ownership", Gupta added.
