MSME Receivable Finance Scheme (MSME RFS)

Understanding the crucial impact of rapid receivables on the financial health of Micro, Small, and Medium Enterprises (MSMEs), SIDBI offers the MSME Receivable Finance Scheme (MSME RFS). This scheme effectively tackles the challenge of delayed payments to MSMEs concerning credit sales to large purchaser companies by providing financing against bills of exchange or invoices. In this article, we will explore the MSME Receivable Finance Scheme (MSME RFS) in detail.

Objective

The primary goal of the MSME Receivable Finance Scheme is to resolve the issue of delayed payments to MSMEs from credit sales to large purchaser companies by offering financing against bills of exchange or invoices from such sales. The scheme covers the discounting of bills of exchange/invoices resulting from the sale of indigenous components, sub-assemblies, parts, accessories, and intermediates by MSME units. Additionally, services provided by enterprises in the service sector to purchaser companies are also included.

Benefits of MSME Receivable Finance Scheme

The MSME Receivable Finance Scheme (MSME RFS) provides significant benefits to MSMEs, including:

Quicker realization of receivables
Discounting at competitive rates
Efficient cash management

Eligible Customers

Limits are approved for well-performing large corporates or purchaser companies with solid financials, covering the purchase of components, sub-assemblies, parts, accessories, and services obtained from MSMEs. This scheme allows MSME sellers to realize dues early from large corporates by discounting the bills.

Eligibility Criteria

The eligibility criteria to gain benefits from MSME Receivable Finance Scheme (MSME RFS) are explained below:

Either the purchaser or seller needs to qualify as an SME (manufacturing/service sector unit).
Eligibility parameters include financial aspects such as turnover, net worth, profit, positive cash flow, liquidity position, and external or internal credit rating, including security.

For understanding more about credit-related processes, you may explore our guide on Service Tax in India.

Methodology

MSME suppliers prepare bills of exchange for purchaser companies against supplies made or services provided, accepted by the purchaser company. If large corporates do not provide bills of exchange, discounting is based on agreed terms between the corporate and SIDBI, derived from invoices and proof of delivery challans/Goods Received Notes.

Instruments of Assistance

Assistance instruments include bills of exchange backed by invoices as well as standalone invoices.For more on financial processes, read about the Winding Up of a Company.

Tenor

The usance for bills of exchange or invoices ranges between 90–180 days.

Quantum of Assistance

The assistance is need-based, not exceeding 50 crores for eligible large purchaser corporates.

Validity of Limit

Limits are sanctioned with a one-year validity, subject to a half-yearly review and annual renewal.

Rate of Discount

Discount rates are dependent on the internal/external credit rating of the MSME or large corporate.Learn about enhancing your company's financial operations by visiting our Business ITR Filing Guide.

External Rating Criteria

Purchaser corporates with an external rating of "AA-" and above may qualify for a clean limit sanction on merits.For legal disputes regarding contract breaches, refer to Arbitration in India.

MSME Receivable Finance Scheme (MSME RFS) Application Procedure

The application process for the MSME Receivable Finance Scheme (MSME RFS) is as follows:

Step 1:Eligible MSME enterprises need to approach the relevant branch to apply for a loan.

Step 2:The applicant must submit an application with the required documents. The application form for the MSME Receivable Finance Scheme is attached here:

Annexure_Common-Loan-Application-form-with-formats-I-II-and-III-English-1-10-1-5

Step 3:Upon verification of details, SIDBI will sanction the loan, and the amount will be credited to the beneficiary's account.

For assistance with registration processes, simplifying your Udyam Registration might be beneficial.

For further details on related schemes, you may explore:

For inquiries on how to handle GST-related matters, check out the guide on Notice Replies for GST.

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Frequently Asked Questions

Common questions about MSME Receivable Finance Scheme.

The MSME Receivable Finance Scheme (MSME RFS) is a scheme offered by SIDBI to help mitigate the problem of delayed payments to Micro, Small, and Medium Enterprises (MSMEs) for their credit sales to large purchaser companies. It provides finance against bills of exchange or invoices arising out of such sales.

The primary objective of the MSME Receivable Finance Scheme is to mitigate the problems of delayed payments to MSMEs in respect of credit sales to large purchaser companies by offering finance against bills of exchange or invoices arising out of such sales.

The benefits of the MSME Receivable Finance Scheme for MSMEs include quicker realization of receivables, discounting at competitive rates, and efficient cash management.

The eligible customers for the MSME Receivable Finance Scheme are well-performing large corporate purchaser companies with sound financials, and MSME sellers seeking early realization of dues from these large corporates by discounting the bills.

The eligibility criteria for the MSME Receivable Finance Scheme include either the purchaser or seller qualifying as an MSME (manufacturing/service sector unit), and satisfactory financials such as turnover, net worth, profit, positive cash flow, liquidity position, external or internal credit rating, and security.

The methodology under the MSME Receivable Finance Scheme involves MSME suppliers drawing bills of exchange on purchaser companies against supplies made or services rendered, and the bills of exchange are accepted by the purchaser company. Where purchaser companies do not provide bills of exchange, discounting is made based on agreed terms between the corporate and SIDBI, using invoices and proof of delivery.

The instruments of assistance under the MSME Receivable Finance Scheme are bills of exchange backed by invoices and invoices.

The tenor for the MSME Receivable Finance Scheme is usance of bills of exchange or invoices not exceeding 90 to 180 days.

The quantum of assistance under the MSME Receivable Finance Scheme is need-based, but not more than 50 crores in respect of eligible large purchaser corporates.

The limits under the MSME Receivable Finance Scheme are sanctioned with a validity of one year, with a half-yearly review and annual renewal.