Fintech startup clear to provide capital solutions to SMEs

Clear (formerly ClearTax) has forayed into providing merchant lending and invoice discounting for small and medium enterprises (SMEs). In a recent statement, the company has announced the launch of its invoice discounting service offering where the credit option will be available to Clear’s existing 3,000 plus customers and give them access to working capital.

A survey conducted by the startup revealed that over 800 SMEs are experiencing major supplier payment delays, up to 60-120 days. The MSME Act that was amended in 2006 stipulates that supplier payments must be made within 45 days. However, invoice processing can take five to 20 days, or even months in many cases, before the payments are released.

This causes cash flow woes to suppliers who are compelled to take credit from the unorganised lending sector at unmanageable rates of interest. They usually depend heavily on the unorganised lending sector because the organised channels are ridden with cumbersome loan application processing and huge collateral. Tech-enabled invoice discounting helps fill the gap Clear stated.

Tech-enabled invoice discounting is early credit given to suppliers at minimally reduced rates. This form of credit is still nascent in India and is an estimated 0.2 per cent of the GDP. Comparatively in China, it is as high as 11 percent of the country’s GDP.

The need of the hour is a common platform for suppliers and financers to seamlessly operate and scale up an invoice discounting program. Clear’s footprint in tech-enabled GST payments and electronic invoicing enables the company to foray into discounting supplier invoices.

Clear’s product helps deliver to suppliers instant working capital and liquidity. The artificial intelligence (AI) and machine learning (ML)-based platform connects seamlessly to ERPs and offers a discount rate selection that is suitable to customers and suppliers. The borrower may choose from an array of financing options. He can use his own surplus cash, choose a line of credit from banks, or approach the Trade Receivables Discounting System (TREDS) marketplaces available on Clear’s platform to finance early payments.

Clear stated that it anticipates processing at least $3 billion in advances by FY 2024 via invoice discounting. The company’s fintech SaaS experience empowers Clear to cater to the need for tech-based solutions for MSME credit and B2B payments.