How to evaluate and use invoice discounting to solve cash flow problems
Invoice discounting converts your outstanding invoices into immediate cash, solving the gap between when you invoice your clients and when they pay. It's one of the most useful working capital tools for Indian B2B businesses — and one of the most underused.
How it works: you submit an outstanding invoice (from a creditworthy client) to a bank, NBFC, or fintech lender. They advance 70–85% of the invoice value immediately. When your client pays on the due date, you receive the remaining 15–30% minus the discounting fee. The fee is typically 0.8–2% of the invoice value for 30–45 day invoices — equivalent to an annualised cost of 10–24% depending on the platform and the client's creditworthiness.
The cost seems high — but compare it to the alternative. If your working capital is constrained and you're turning away business, the cost of invoice discounting on a ₹10L invoice is ₹10,000–20,000 for 30 days. If that ₹10L of working capital allows you to execute a new project that earns ₹1.5L margin, the net return is strongly positive.
What makes a good invoice for discounting: invoices from creditworthy clients (large corporates, PSUs, and established companies get better rates), with clear payment terms, undisputed, and from clients who don't have a history of late payment. Invoices from small or unknown buyers are either not accepted or priced at very high rates.
Platforms to evaluate: for invoices from large corporates, TReDS platforms (M1xchange, Receivables Exchange of India, RXIL) offer the best rates because they're backed by government framework and multiple bank participants. For broader eligibility, KredX, Cashflo, Drip Capital (for exporters), and Lendingkart offer invoice discounting. Your primary bank may also offer the product.
Build invoice discounting into your cash flow planning, not as an emergency measure. If you know you'll need working capital in peak months, arrange the discounting facility in advance — not when you're already in a cash crunch.