GOOD OPTION FOR SHORT TERM INVESTMENT

*******************************************************

 

 

With Inflation shooting up and FD rates not keeping match, those who are looking for a shorter time horizon of investments are in a huge fix.

Their money in FD and debt funds are actually yielding negative returns.

 

What’s the alternative then?

 

Invoice Discounting could be the right answer.

 

What’s this Invoice Discounting?

 

INVOICE DISCOUNTING EXPLAINED:

Invoice Discounting is a way of ensuring Capital Working requirement is fulfilled by taking against Bills Receivable.

 

Let me explain in a simplistic way.

 

It’s a given that almost all FMCG companies outsource their product manufacturing. Whether it's Hindustan Unilever, Godrej, or Emami ... the majority of their products are outsourced.

 

For example, say the famous Ponds Company powder is manufactured by Ador Multiproduct (Peenya, Bangalore)

Now. Ador Multiproduct Ltd manufactures powder for Ponds Company, which does the packaging and then sells it under the PONDS COMPANY brand.

 

Let’s say, Ador manufacturers powder worth Rs.1 crore and supplies it to Ponds Company.

Ponds Company which has to pay Ador Rs.1 crore does not pay immediately.

Instead, it raises an invoice promising the entire 1 crore in about 30 days to 90 days (1 month to 3 months)

But, here Ador wants cash immediately as it needs for working capital, etc

So.. not wanting to wait for 90 days, Ador goes to an NBFC / Bank and gives this Invoice to Ponds Company and asks for CASH PAYMENT.

 

The Bank / NBFC then gives cash to Ador Multi products ltd. But not the entire Rs.1 crore but about 80% of it, which is Rs.80 lakhs.

 

Ador is happy with Rs.80 lakhs cash (as it would have a sufficient margin of profit)

 

Post the 90 days, this Bank / NBFC then receives the entire Rs.1 crore from Ponds Company thus making a clean Rs.20 lakhs profit.

This is what is called Invoice Discounting.

 

The majority of Small and Medium Scale companies do this Invoice Discount to ensure the smooth running of their day-to-day operation.

 

There are many platforms that have started offering small investors an opportunity to participate in Invoice Discounting.

 

 

GOOD OPPORTUNITY FOR SHORT TERM

 

Retail small investors had limited to nil opportunity to participate in these Invoice Discounting but now with platforms like JIRAAF / Orowealth / TradeCred coming up... it’s getting easier to invest.

 

The investment amount starts as low as 50k.

 

ALL GAINS ARE ADDED TO YOUR INCOME AND THUS TAXED AT SLAB RATES

 

 

ADVANTAGES:

a)       Definitely better returns compared to traditional avenues like Bank FD, RD, and even Debt Funds

b)       Beats even newer short term investment avenues like P2P

c)        Relatively Safer

d)       Provides Diversification in terms of Asset Allocation

 

TO INVEST IN INVOICE DISCOUNTING VIA JIRAAF PLATFORM, YOU CAN CLICK ON THE FOLLOWING LINK   https://bit.ly/38oRDLM/ 

 

 

CAVEAT FOR INVESTORS:

Yes, the Bank / NBFC will have the Invoice in hand and can go to court if the company (in our example, Powder company P) does not make the payment.

Even though this rarely happens, we as investors need to do our homework and ensure the following

 

1. You, as an investor, should make sure that the company which is making the final payment has a good reputation for fulfilling its commitment on time.

Their cash balance, credit history, and debt book should be thoroughly analyzed before you commit your money.

 

2. Even the supplier should also be a reputed one so that the goods sold do not come back due to lack of quality and the invoice stands canceled!!

 

3. The Invoice could itself be a fraudulent one!

 

Thus, though Invoice Discounting looks great on paper, it has its own risks, and hence its better to take an expert’s opinion before going ahead with allocating money.

Srikanth Matrubai

 

All the Best,

 

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All the best,
Regards,
Srikanth Matrubai

MUTUAL FUND DISTRIBUTOR

REBALANCE VOLATILITY CERTIFIED COACH

Srikanth Matrubai, Author of the Amazon Best Seller DON'T RETIRE RICH

You are strongly encouraged to consult your financial planner before making any decision regarding this investment. The views expressed here are the author's personal views and should not be interpreted as a recommendation to invest/avoid.

Once again request you to note that this article is purely for information purposes and is the author's personal views. 
You are strongly requested to take the opinion of an expert before committing any money to any investments. 

The author is entitled to change his views / opinons

Srikanth Matrubai Author of the Amazon Best Seller DON'T RETIRE RICH

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