Working Capital & Trade Finance
Invoice Factoring & Bill Discounting Calculator
Evaluate immediate Day-1 cash disbursement, lender discount fees, margin retention, 18% GST on processing fees, and true annualized borrowing APR across TReDS, NBFC, and Fintech factoring.
1. Invoice & Credit Tenor
Total bill value including GST as approved by the debtor
Percentage of invoice disbursed immediately (typically 80% to 90%)
2. Financing Structure & Platform
3. Discount Rate & Additional Fees
Financing cost per annum on advanced funds
Statutory 18% GST under SAC 9971 (interest is exempt)
Immediate liquid funds disbursed to your account
Balance paid upon customer settling the invoice
1.43% of bill • Flat 1.48%
Annualized interest rate on actual net funds in hand
Complete Financial Breakdown
- Gross Invoice Amount
- ₹15,00,000.00
- Gross Advance Financed (85%)
- ₹12,75,000.00
- Retention / Margin Reserve (15%)
- ₹2,25,000.00
- Discount / Financing Charge (9% for 60d)
- ₹18,863.01
- Processing & Documentation Fee (0.15%)
- ₹2,250.00
- 18% GST on Non-Interest Fees
- ₹405.00
Credit Comparison & Insights
Factoring is ₹₹2,584.73 more economical than equivalent CC/OD borrowing.
Frequently asked questions
What is the difference between Invoice Discounting and Invoice Factoring?
In Invoice Discounting, the borrower sells invoices to a financier to unlock immediate liquidity while maintaining direct credit control and customer collections in-house (often confidential). In Full Factoring, the factor takes over sales ledger administration, buyer credit assessment, and direct debt collection, providing either recourse or non-recourse bad debt protection.
How does TReDS (Trade Receivables Discounting System) benefit MSMEs?
TReDS is an RBI-regulated electronic platform (operating via RXIL, M1xchange, and Invoicemart) where MSME suppliers upload invoices against designated corporate buyers, CPSEs, and Government departments. Multiple institutional banks and NBFCs bid competitively, resulting in significantly lower interest rates (typically 8% to 10.5% p.a.) and non-recourse settlement without collateral.
What is the difference between Recourse and Non-Recourse Factoring?
Under Recourse Factoring, if the buyer/debtor defaults or delays payment past the grace period, the business must repurchase the invoice and repay the factor. Under Non-Recourse Factoring, the factor absorbs the buyer credit and insolvency risk, charging an additional credit protection fee (typically 0.4% to 1.0%).
Why is the Effective APR higher than the quoted discount rate?
Financiers quote annual discount rates (e.g., 9% p.a.), but financing costs also include processing charges and GST. Furthermore, the factor only disburses 80% to 85% of the invoice while charges are deducted upfront, meaning your cost is calculated against a lower cash base in hand. The true APR formula measures actual annualized interest on the net funds disbursed.
Does GST apply on bill discounting and factoring fees in India?
Pure interest charges and bill discount spreads are exempt from GST under Notification No. 12/2017-Central Tax (Rate). However, all ancillary charges such as loan processing fees, documentation charges, verification fees, and credit protection fees attract 18% GST (SAC code 9971).
How does Factoring compare to a Bank Cash Credit (CC) or Overdraft (OD) limit?
Cash Credit requires extensive collateral (property, hypothecated stock), audited financial track records, and personal guarantees, and stays on your balance sheet as debt. Factoring is off-balance-sheet trade finance linked directly to your buyers' creditworthiness, scaling automatically as sales volume grows without locking up real estate collateral.