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馃挵Low Risk, High Return Investment | INVOICE DISCOUNTING / ft. Himanshu Malhotra - YouTube
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>> RISHABH: Show me the percentage return
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Wow, it is 11.5%, Amazing
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>> MANDEEP: Tell me honestly
Do you need such an investment
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Which is not linked with stock
market but gives good returns
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Probably That's why people like PPF
Although the return is 8% in that
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But your investment is not linked with the stock market
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And you can sleep peacefully
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Let's know about an investment scheme
which is not linked with the stock market
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And returns are 11%-12%
3-4% more than PPF
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You don't need to wait
for 15 years like PPF
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As this is a short term investment
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You can earn profit in 1-3 months easily
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We are talking about Invoice Discounting
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I personally like it
But I am not an expert in this
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So, I invited an expert
HIMANSHU MALHOTRA
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He is an IIT Bombay Graduate
A strategy consultant by profession
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He was also there in
our debt fund series recently
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Where he taught us that how
to pick the best debt funds
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>> HIMANSHU: This is an
interesting concept for me
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because In our group where we research
about innovative investment ideas
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Or we discuss finance, investment, etc
But I was surprised that
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No one was aware of the invoice
discounting in our group of 7-8 people
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So, I thought this is worth
sharing this concept with you
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Like how to invest, returns,
involved risk etc
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>> MANDEEP: I am, as you know
Money Minded Mandeep
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[Intro Music]
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>> MANDEEP: As you know
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Small Businesses are the backbone of the economy
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Small businesses are the backbone
of the American economy
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Small businesses are the backbone
of this nation's economy
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Small businesses are the
backbone of our economy
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Small businesses are the
backbone of the economy
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>> MANDEEP: There are thousands
of small businesses in India
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They all need cash to run their operations
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It is very difficult to manage cash flow
for them. Let's learn with an example
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A small vendor, GUPTA BOTTLES
manufactures the bottles
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Coca-Cola approaches GUPTA and
says- We need 1 lakh bottles from you
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So that we can sell it to customers
after filling with cold drink
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GUPTA BOTTLES is happy as a very big
client has approached him with a big order
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But here is a problem. Coca-Cola
says - we are a big brand
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And we are giving a big order
So, we want Bottles today
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But we will pay you after 90 days
Give us a credit period of 90 days
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If Gupta Bottles refuses
to accept the condition
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Then Coca-Cola will give their
order to neighbor Sharma Bottles
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Gupta Bottles has to accept
the conditions to get this deal
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And has to wait for 90 days for the money
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But Gupta Bottles need money for
employees salary, paying the electricity bill
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To buy raw material to
manufacturing new bottles
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But they will receive the payment after 90 days
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Gupta Bottles can take a loan from a bank
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>> HIMANSHU: Banks have
certain criteria to give loans
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But these small companies
can't fulfill that criteria
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So, they can't take a loan from banks
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And in many cases, they also
can't take it from NBFC
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>> MANDEEP: Another option is to
take a loan from an individual like me
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They will show me their 10 lakh invoice from Coca-Cola
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Its payment will come after 90 days
But they need money today
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They demand money from me and they
are ready to give the invoice to me
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So, I will receive the payment of
Coca-Cola when they will send
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I will ask them - How can I
wait for 90 days if you can't
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Gupta will say me - "Buy my 10 lakh
invoice for only 9 lakh rupees"
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I can't bear a 1 lakh loss
but I need money today
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You will get 10 lakh if
you can wait for 90 days
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Thus you will earn a profit of 1 lakh
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So, Mandeep took advantage
of Gupta's compulsion
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And this is known as Invoice Discounting
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>> HIMANSHU: Why we call it Invoice Discounting?
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Because Gupta Bottles sold
their invoice to me at a discount
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They raised capital using invoice
That's the reason behind its name
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This is one of the ways MSMEs
in India use to raise the money
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>> MANDEEP: A lot of investors
are ready to help vendors like Gupta Ji
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Who can give money today for an invoice
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And investors will get
money as invoice payment
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There are a lot of vendors who
need money today for the invoice
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And a lot of investors are ready
to give money them today
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But how will these both parties search
each other? There are a lot of portals
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TradeCred is one of them which
is also used by HIMANSHU
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Vendors like Gupta Ji can
sell their invoice there
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And investors like you and
me can buy invoice there
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>> HIMANSHU: If the Gupta Bottles Invoice of
Coca-Cola is worth 100 rupees
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These platforms will raise that invoices
on 20% discount (In 80 Rupees)
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So, we are giving 80 Rupees to Tradecred
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And TradeCred is paying the same to Gupta Bottles
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When finally Coca-Cola will pay Rs 100
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Then rest 20 Profit will be shared
between TradeCred and Investors
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Typically, they give 11.5%-12% to investors
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And keep rest 7-8% themselves
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>> MANDEEP: But there are always
some risk involved in investments
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So, you should know about its risks
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The biggest risk in this
investment is Credit Risk
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Example no 1 -
Brand Matters
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When Gupt Ji sold 1 lakh bottles to
Coca-Cola and I bought Gupta Ji's Invoice
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I bought it with the intention that I will get
payment after 90 days from Coca-Cola
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As Coca-Cola is a good brand
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That's why I am comfortable in buying this invoice
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Because I know I will receive payments
from Coca-Cola after 90 days
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But If Gupta Ji has sold those bottles
to an unknown company then?
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>> HIMANSHU: As that company is new in the market
We don't have much knowledge
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About their brand, credit history, authenticity, etc
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That's why we are safer in
Coca-Cola case rather than this one
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In the case of Big companies like
Britannia, HUL, Coca-Cola, PNG
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You can definitely invest
because default risk is very low
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For confirmation, you can check all
details on TradeCred about the company
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Like Coca-Cola is a big company
and they put big orders
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But Gupta Bottles is a bottle supplier
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They get raw material, packaging material
etc from some other companies
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So, if all these are selling their invoice
Then you can a view about Coca-Cola
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Like the total invoices and
the average delay in invoices etc
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Generally, big companies have
average delay of 0 or a few days
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This reduces your risk
And ensures safety
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>> MANDEEP: Example no 2
Insolvency
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>> HIMANSHU: Many people are
working from home due to lockdown
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Suppose you need a table, chair, lamps, etc for it
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And many places an order on FURLENCO
For the requirement of table
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Suppose FURLENCO gets an order of
10,000 tables. It is a service company.
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So, FURLENCO said its vendors to prepare 10,000 tables
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As FURLENCO has no money at this time
As If we buy the table of 2000
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then we will only give Rs 200 per month
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FURLENCO will say its vendor to pay money after 5 months
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So, the vendor who took the order
of 10,000 tables from FURLENCO
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Will come on these platforms to sell his Invoice
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Investors like us will see that Invoice
that this vendor needs some money
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So, we have to see that from which
company will he get money
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There was Coca-Cola in the first case
Now it is FURLENCO
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Which is a reputed company. But it is
still smaller as compare to Cola-Cola
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We have to see that what if FURLENCO
is unable to earn money
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What is FURLENCO is not successful
in its business model
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So, maybe FURLENCO will
not able to pay the amount
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So, this is a risk when the company
is unable to pay you the money
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>> MANDEEP: Example no 3
Dishonorable Invoice
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>> HIMANSHU: Sometimes, it may happen
that the company who is selling its invoice
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Knows that this invoice
will not be cleared
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Still, that company is raising
Rs 80 from you for Rs 100
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>> MANDEEP: Example no 4
Disputed Invoice
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>> HIMANSHU: You paid 80 Rupees
for the invoice of 100 Rupees
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After 15 days, Coca-Cola gets
into a dispute with Gupta Bottles
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That the quality of your bottles
is not up to the mark
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We can't pay you Rs 100
We will pay less or will not pay
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This type of disputes may
happen in the invoices
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You may lose your amount
in this type of cases
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You can see the company's methodology
to bringing the invoice on the portal
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Like I deal with OroWealth
Let's know about their methodology
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When Gupta Bottles wants to
bring his invoice on this portal
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It doesn't put that invoice directly on the portal
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First, it will confirm with Coca-Cola
that is this invoice legitimate
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Will you pay this amount?
Have you any dispute?
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Only when this invoice is approved
by Coca-Cola, it is put on the portal
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This reduces the dispute risk
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>> MANDEEP: So, these are some
risks in invoice discounting
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Still, HIMANSHU likes this
I asked why you like it?
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Then I came to know that
there is another intermediary
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On the TredCred which name is Orowealth
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Orowealth will personally verify all
the invoice before going ahead
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>> HIMANSHU: What assurance
I get from Orowealth?
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I get Instant Liquidity
What does it mean?
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Gupta Bottles sold the invoice to me for 80 Rupees.
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I will get 100 Rupees from Coca-Cola after 3 months.
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Orowealth promises me that up
to 5 lakh on my investment
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They will offer me some instant
liquidity with some charge
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I invested 80 today, I will
get 100 after 3 months
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But If I want my money after 1 month
I hadn't received from Coca-Cola
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So, Orowealth will give money
after deducting the 1-1.5% Commission
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I get assured that even if there is a risk
If Coca-Cola doesn't pay me
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But Because Orowealth is offering
me Instant Liquidity up to 5 lakh
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My investment up to
5 lakh rupees is secure
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Irrespective that company is paying me or not
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So, this reduces my risk
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The second mechanism is,
Suppose I invested in ABC Drink
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But ABC Drink refused to pay in which I invested
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So, I alone don't have
to bear that loss
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Orowealth will check its all losses
As they are also earning 8%
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Orowealth will check all defaulted
invoices or delayed invoices
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I alone don't need to face loss unless
their total losses are not more than 8%
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It is also known as NPA
Non-Performing Assets
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In the last 8-10 years, NPA is
near 1-2%, It has never gone 8%
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So, it is an unlikely scenario that it will hit till
then the investment is less than 5 lakh
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>> MANDEEP: If you are listening
about Invoice Discounting first time
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Then you should research
more about it before investing
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If you are considering, then let
I explain it on the TradeCred portal
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If you create an account on TradeCred
using the link given in the description
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Then you will get a little more return than
market and LLA will also get a little support
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After approving your account on
TradeCred, Go to its portal
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And enter your PAN number and
OTP on the investor login option
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On the current deals, you will
see a lot of invoices to buy
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You should note all the details
involved with every Invoice
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For Example, Orowealth is written
on the top right corner of Invoice
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there is also a tag of ZERO COST INSTANT LIQUIDITY
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that means Orowealth takes guaranty of this invoice
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You can easily invest up to 5 lakh in this
invoice irrespective of which company will pay
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If you want to know that which
company will pay the invoice amount
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You can read the deal report
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In the about customer, there is
written Zetwork manufacturing businesses
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Means Zetwork will pay for this invoice
which is formed by IIT Madras alumni
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This company's history with
TredCred portal is given here
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This company has paid a total of 714 invoice
payments. 90% of invoices were on the time
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This means there was a delay in 10% of invoices
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You can see the company's financial
summary and vendor name
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You can see net IRR in the top
left corner of every invoice
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This means you will get an 11% annual
return if you buy this invoice
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In the deal summary, the due date
of the invoice is given here
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If I buy this invoice today on 13 October
I will get its money on 20 December
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Total investment amount and
maturity amount is also given here
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There are a lot of deals on Tradecred
on which top right corner
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The logo of the company is given
which will pay you for this invoice
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For example, it is Flipkart which is a reputed
company which indicates a low-risk investment.
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You can see Coca-Cola here. I can
ignore the companies which I don't know
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I can take Orowealth guaranteed invoice
or the invoices of reputed companies
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You have to add money in
your wallet on this portal
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Then you can buy any invoice you want
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First, let's know about benefits
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The first advantage is that this
is a short-term investment.
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You don't need to wait for years
Return is also good
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The second benefit is you can manage your risk yourselves
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You can check company details. You also
have the Orowealth guaranty option
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You can take risk accordingly
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>> HIMANSHU: 4th benefit is
portfolio diversification.
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We should not put all our eggs in one basket
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That's why we diversify in gold,
stocks, mutual funds, etc
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Invoice discounting also give you
chance to diversify your investment
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And this is not related to the stock
market. You can get an 11-12% return
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MSMEs always need money and
they will keep raising money like this
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You have to choose the company
wisely according to your risk capacity
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>> MANDEEP: Let's know
about its disadvantage
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You can't start with Rs 500 in
this option like mutual funds
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Every deal has a minimum amount.
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Invoices worth crores rupees are also
available
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but you can start with a minimum 50K
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I hope you learned something new
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Don't invest in excitement. I am
putting the link in the description
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Learn about it, explore it more
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Then if you find it insightful then
invest in a minimum risk investment
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I am MANDEEP. I will see you
in the next video. By ...
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