Bill Discounting Benefits each Parties Involved

1. Bill Discounting Benefits each Parties Involved MYND FINTECH PRIVATE LIMITED (“MYND FINTECH”)

2. What is Bill Discounting? Business discounting allows a business to get quick payment for their work and meet operating expenses without having to depend on an external agency to provide the funds. Bill discounting, also known as invoice discounting, is a trading activity in which a seller sells goods or services to a buyer. The buyer has to make the payment as per an agreed credit period. If the buyer needs money before that, he can approach a bank or some non-bank financial institution (NBFI) and "sell" that invoice to them. The financial institution gets the invoice verified by the buyer and then makes payment to the seller on their behalf; however, they make some deductions, called ‘discount’, as their commission.

3. EXAMPLE OF BILL DISCOUNTING: Suppose you supply office stationery to ABC Corporation. The invoiced amount is Rs. 1,00,000. Now, in such a case, the buyer (AMC Corporation) agrees to pay a portion of the invoice after 30 days. But If you need money within 30 days, the bank will issue a letter of credit. This is an advance payment against which you can collect money from the bank. For this advance payment, the bank charges some interest (5%). The bank will deposit Rs. 95,000 in your account against the advance payment. At the end of 30 days, you can collect Rs. 1,00,000 from the buyer against his letter of credit. By settling the invoice early, the seller could get paid. This practice is known as bill discounting or invoice discounting.

4. PROCESS of BILL DISCOUNTING When a seller provides goods or services to a buyer, an invoice is raised. The buyer approves the invoice, which means the buyer promises to make payment on the due date. The seller approaches a financial institution to discount the bill. The financial institute has the responsibility to verify the creditworthiness of the buyer and the legitimacy of the bill. After a loan is approved, the bank disburses the funds to the seller, deducting a pre-defined fee, discount, or appropriate margin. This leads to quicker payments for the seller, which can be used for other business purposes. At the end of the original credit period, the buyer must make a final payment to the financial institution.

5. FEATURES OF BILL DISCOUNTING: • Evaluating the seller and buyer: Before approving a bill discounting request, the bank or non-bank financial company first checks the seller’s reputation and the buyer’s creditworthiness. This is done to ensure that the buyer does not default on making the payment to the bank. • Making instant cash available for the buyer: Bill discounting is a form of account receivable financing in which the bank or non-banking financial corporation (NBFC) purchases an invoice and immediately pays after "discounting" the bill. • Discount Charge: The difference between the face value of a bill and the amount approved and disbursed by a bank is known as discount. The discount is calculated on the maturity value at certain percentage per annum. • Maturity: The maturity date on a bill is the date on which payment of the invoice is due. The average length of time before bills mature is 30, 60, 90 or 120 days."

6. BENEFITS OF BILL DISCOUNTING Bill discounting, as a financial transaction, benefits each of the parties involved—the seller, the buyer, and the financial institution. The buyer and the seller can stabilize their fund flow, while the financial institution can use funds lying with them to make a profit. The specific benefits of bill discounting are as follows: Improves cash flow position: Businesses of all sizes rely on cash flow to survive and grow. Bill discounting is one tool that can help businesses in a short cash-flow situation. Quickly received funds can be used to pay salaries, procure materials for the next order, or invest in some asset. Provides instant access to cash: A bill discounting facility is a method sellers can use to get payment against their invoices quickly and easily. This method allows sellers to better manage their working capital and keeps the working capital cycle short. Financial institutions such as MYND offer funds within 24 to 72 hours of receiving an invoice.

7. 3. No collateral involved: Bill discounting is a simple procedure. It does not require much documentation. Sellers are not required to post collateral for funding. The invoice itself constitutes strong enough security for the seller to obtain funds. 4. No debt incurred: Bill discounting facilities provide funds in advance, by discounting the buyer's invoices. Invoices may be discounted on a nonrecourse basis when the funds are not required to pay the debt, or on a recourse basis where funds are provided only if all amounts due have been paid but do not cover shortfalls. A nonrecourse discount does not cause the buyer to take on any additional risk beyond that associated with normal business operations, and thus is generally safer than recourse discounts. 5. No impact on business sheet: The bill discounting facility does not create a tax liability. Although it is an off-the-book process, it has no impact on the balance sheet of the business.

8. Thanks! Any questions? You can find MYND FINTECH at: myndfin.com hello@myndfin.com +91-124-4646000 2nd Floor, 288-A, Udyog Vihar IV, Gurugram, Haryana - 122001