Tag Archives: msme finance

Invoice discounting for MSMEs: How to unlock cash flow quickly?

August 21, 2025

According to The Economic Times, India’s Micro, Small, and Medium Enterprises (MSMEs) continue to be the backbone of the national economy, contributing roughly 30% to the country’s GDP while employing over 110 million people across diverse industries. Yet, despite this massive footprint, MSMEs continue to face their biggest hurdle: timely access to working capital.

Delayed payments remain one of the most pressing challenges. Receivable cycles for MSMEs often stretch well beyond 60–90 days, tying up critical funds in unpaid invoices. This creates liquidity bottlenecks that slow down operations, force small businesses to rely on costly informal credit, and in many cases, stall growth altogether. The problem is particularly acute in agri-linked MSMEs, where seasonal demands, procurement cycles, and buyer concentration magnify the stress.

Against this backdrop, invoice discounting has emerged as a practical and increasingly popular financing solution. By allowing MSMEs to unlock cash against unpaid invoices, it provides immediate liquidity without the need for heavy collateral. With the rise of digital lending platforms, the process has become faster, more transparent, and more accessible than ever before. For businesses struggling with delayed receivables but eager to capitalize on new opportunities, invoice discounting can be the difference between stagnation and sustainable growth.

invoice discounting

What is invoice discounting?

Invoice discounting is a short-term borrowing option that enables MSMEs to raise funds against their outstanding invoices. Instead of waiting for a buyer to settle payments after 60 or 90 days, the business can sell the invoice to a financier and receive a majority of the invoice value upfront. Once the buyer pays the invoice, the financier deducts a small fee and releases the balance.

Unlike traditional bank loans, invoice discounting is linked directly to sales and receivables. This means the funding grows in proportion to business turnover and does not always require physical collateral. It is especially suited for MSMEs that supply to large, creditworthy buyers but struggle with elongated receivable cycles.

Why does it matter for MSMEs in 2025?

The importance of invoice discounting has only grown in recent years. Financiers have shown growing appetite as invoice-backed lending is considered lower-risk when backed by reputed anchors.

For MSMEs, this means greater access to affordable working capital, faster turnaround times, and reduced reliance on informal lenders. In a market where liquidity crunches are often the difference between capturing an opportunity and losing it, invoice discounting ensures that businesses can keep production cycles running smoothly, pay suppliers on time, and meet seasonal demands.

What are the benefits of invoice discounting?

  • Faster access to cash flow: Convert unpaid invoices into ready funds in days.
  • No heavy collateral needed: Limits are based on receivables and anchor strength rather than property or machinery.
  • Competitive pricing: With multiple financiers bidding on credit lending platforms, MSMEs can often secure better rates.
  • Improved discipline: Digital trails encourage timely approvals, clean invoicing, and healthier buyer-supplier relationships.
  • Scalability: As your sales and invoices grow, so does the financing capacity.

Risks and considerations

While invoice discounting offers multiple benefits, MSMEs should also evaluate:

  • Anchor reliability: The model depends heavily on the buyer’s ability and willingness to pay on time.
  • Documentation quality: Errors in e-invoicing, GST filings, or purchase orders can delay funding.
  • Cost-benefit analysis: Discounting carries a fee, so businesses must weigh it against the returns gained from faster inventory rotation or early-payment discounts.
  • Platform choice: Several financial institutions & platforms ensure transparency and regulatory oversight, while NBFCs and fintechs may offer speed and flexibility.

How Agriwise supports MSMEs?

Agriwise, as a specialised NBFC, understands the unique challenges of agri-linked MSMEs and allied sectors. Our services include invoice discounting and vendor financing, enabling businesses to access cash tied up in receivables. Beyond this, we provide Structured Trade Finance (STF) solutions through StarAgri that cover not just warehoused stock but also in-transit and imported goods. Additionally, we offer Loan Against Property (LAP) and equipment financing to meet broader credit needs. By combining deep sector expertise with data-driven assessments of anchors and cash-flow cycles, Agriwise ensures that MSMEs can unlock liquidity quickly, responsibly, and at competitive costs—empowering them to grow without over-reliance on informal credit sources.

Making invoice discounting work for you

To effectively leverage invoice discounting, MSMEs should:

  • Map receivables: Identify invoices linked to strong anchors with consistent payment track records.
  • Digitize processes: Maintain clean e-invoices, GST returns, and supporting documents.
  • Select the right partner: Choose NBFCs like Agriwise for transparent & tailored solutions.
  • Assess ROI: Compare the cost of discounting against benefits like faster raw material procurement or meeting seasonal demand.
  • Scale gradually: Start with select anchors, then expand financing to multiple buyers to balance.

Conclusion

LIn 2025, as MSMEs continue to drive India’s growth story, timely access to working capital remains their most critical requirement. Invoice discounting has emerged as one of the most efficient ways to address this challenge—bridging the gap between raising invoices and receiving payments. With regulatory backing, rising digital adoption, and growing financier participation, the ecosystem is more robust than ever before.

For agri-linked businesses in particular, where cycles are seasonal and liquidity is often under strain, invoice discounting can transform financial stability. Backed by experienced partners like Agriwise, MSMEs can turn receivables into growth capital—unlocking opportunities, sustaining momentum, and building resilience for the future.

Disclaimer

The content published on this blog is provided solely for informational and educational purposes and is not intended as professional or legal advice. While we strive to ensure the accuracy and reliability of the information presented, Agriwise make no representations or warranties of any kind, express or implied, about the completeness, accuracy, suitability, or availability with respect to the blog content or the information, products, services, or related graphics contained in the blog for any purpose. Any reliance you place on such information is therefore strictly at your own risk. Readers are encouraged to consult qualified agricultural experts, agronomists, or relevant professionals before making any decisions based on the information provided herein. Agriwise, its authors, contributors, and affiliates shall not be held liable for any loss or damage, including without limitation, indirect or consequential loss or damage, or any loss or damage whatsoever arising from reliance on information contained in this blog. Through this blog, you may be able to link to other websites that are not under the control of Agriwise. We have no control over the nature, content, and availability of those sites and inclusion of any links does not necessarily imply a recommendation or endorsement of the views expressed within them. We reserve the right to modify, update, or remove blog content at any time without prior notice.

What are the future trends in Indian agribusiness & MSME finance?

June 11, 2025

As India marches toward becoming a $5 trillion economy, MSME finance and agribusiness continue to drive inclusive and sustainable growth. With nearly 63 million micro, small and medium enterprises (MSMEs) contributing around 30% to India’s GDP, and agriculture employing over 50% of the workforce, both sectors demand innovative, tech-led financial solutions.

Agricultural credit in India is projected to exceed ₹31.5 lakh crore in FY26, driven by increased formalisation of rural credit—signalling a shift toward more structured, data-backed, and accessible financial systems.
Let’s explore the key agribusiness trends and the evolving landscape of MSME credit solutions shaping India’s economic future.

MSME finance

1. Rise of Digital Lending Platforms

One of the most defining developments in MSME finance is the rapid growth of digital lending. Startups and NBFCs are using alternative credit scoring methods—such as transaction data, utility payments, and GST returns—to extend loans to borrowers who were traditionally excluded from the formal financial system.
This evolution is crucial as millions of businesses lack formal credit histories. Fintech for MSMEs has emerged as a lifeline, especially post-pandemic, offering fast, collateral-free access to capital—reducing dependency on unorganised lenders and improving financial inclusion across rural India.

2. Co-Lending Models: Banks + NBFCs = Wider Reach

To bridge the significant credit gap, co-lending partnerships between banks and NBFCs have gained momentum. Banks offer a lower cost of capital, while NBFCs provide last-mile reach. This hybrid approach is enabling faster and more effective disbursement of MSME loans in 2025, particularly to underserved areas.
In fact, NBFCs have become key contributors to MSME finance in India, outperforming banks in disbursement volumes in the last fiscal year. This collaboration also fosters tailored credit offerings, better suited to the real-time needs of small businesses and agri-entrepreneurs.

3. Government-Led MSME Finance Solutions

The government’s focus on MSMEs has intensified through schemes such as the CGTMSE (Credit Guarantee Fund Trust for Micro and Small Enterprises). As of late 2024, CGTMSE had facilitated over ₹5.2 lakh crore in guarantees. The recent budget also announced the introduction of MSME credit cards, offering working capital limits of up to ₹10 lakh under automatic guarantee coverage.
These initiatives are expected to enhance the accessibility of MSME loans in 2025, especially for first-generation entrepreneurs, women-led enterprises, and rural agri-based MSMEs—boosting job creation and economic resilience.

agricultural finance in india

 

4. Green Finance: A Sustainable Future for Agribusiness

As sustainability gains priority across industries, MSME finance is also adapting. Financial institutions are offering incentives for eco-friendly initiatives—such as solar-powered agri equipment, organic farming, and energy-efficient food processing units.
This alignment with ESG (Environmental, Social, and Governance) goals is a key future trend in agri finance, helping agribusinesses reduce carbon footprints and qualify for better financing terms. Dedicated schemes, such as RAMP and green funds, are expected to drive this transition forward in 2025 and beyond.

5. Embedded Finance and Supply Chain Digitisation

With more MSMEs and agri-enterprises going digital, embedded finance—offering financial services directly within non-financial platforms—is transforming the way loans and payments are accessed. Businesses using marketplaces, ERP systems, or mobile apps can now access MSME credit solutions without leaving their digital ecosystems.
Simultaneously, digital supply chain finance is growing, supporting vendors, distributors, and processors with faster payments, credit lines, and invoice discounting. This is a critical development for agribusinesses relying on seasonal liquidity and fluctuating input costs.

6. AI-Powered Lending & Risk Assessment

The integration of AI and analytics in credit evaluation is redefining MSME finance. By utilising satellite imagery, crop monitoring data, and transaction analytics, lenders can more accurately assess risks and process loans more efficiently. This is particularly impactful in agri-finance, where traditional underwriting methods often fall short.
This data-driven approach ensures that borrowers with viable but informal operations are not left out. It also boosts credit discipline and helps institutions maintain portfolio health while serving new-to-credit segments.

agri tech india

7. Supportive RBI Policies & Rate Cuts

In June 2025, the Reserve Bank of India reduced the repo rate and cash reserve ratio, aiming to boost liquidity in the banking system. These changes are expected to make MSME loans in 2025 more affordable and accessible.
With MSMEs accounting for just 16% of formal credit but over a quarter of GDP, such measures are essential to balance risk and support expansion, especially in agri-linked businesses that face seasonal cash flow cycles.

The Road to MSME Finance: Empowering India’s Growth Engines

The future of MSME finance in India is poised for greater inclusion, efficiency, and resilience. Here’s a snapshot of the key agribusiness trends and financing shifts:

  • Digital lending to expand credit access and formalise small businesses 
  • Co-lending models for deeper credit penetration in underserved markets 
  • Green and ESG-aligned loans to support sustainable agribusiness growth 
  • Embedded finance and supply chain tools for seamless MSME funding 
  • AI-powered crop and enterprise finance for smarter credit risk evaluation 
  • Policy push and credit guarantee schemes for risk mitigation and affordability

With evolving borrower needs and a supportive policy environment, these trends will drive the next wave of growth in both agribusiness and MSMEs.

indian farmer

Agriwise: Enabling the Future of Agri and MSME Finance

At Agriwise, we are proud to be part of India’s evolving MSME finance journey. Our offerings are designed to empower farmers, traders, and agri-based businesses with timely, transparent, and tech-driven credit access.

  • Through our warehouse receipt financing, we help farmers turn stored produce into instant working capital, eliminating distress sales and enabling smarter price realisation. 
  • We combine field-level insights with data analytics and fintech tools to offer tailored credit assessments—redefining MSME credit solutions for the agri sector. 
  • Our growing network of bank partnerships and co-lending arrangements makes MSME loans in 2025 more accessible and flexible. 
  • Agriwise is also committed to sustainability, financial literacy, and empowering women and first-generation agri-entrepreneurs with responsible access to credit.

As the future of agri finance becomes smarter and more inclusive, Agriwise remains committed to enabling India’s farmers and MSMEs with the financial tools they need to succeed.