Economics · Economy
A large manufacturing conglomerate Alpha-Delta Limited has an annual turnover of five thousand crore rupees and buys raw materials from over two hundred small MSME suppliers. Due to a sudden change in global supply chains, the company is facing a temporary liquidity crunch and has requested its MSME suppliers to extend their credit period from forty-five days to ninety days. The MSME suppliers, who are already operating on thin margins, are unable to support this request as it would stop their own production cycles. To resolve this conflict, the CFO of Alpha-Delta Limited suggests using a TReDS platform where the bank of the MSME seller can discount the invoices. In this specific case study, which of the following scenarios describes the financial obligation of Alpha-Delta Limited once the invoice has been successfully discounted on the TReDS platform by a financier?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1The TReDS platform provider guarantees the payment to the financier and Alpha-Delta Limited pays the platform provider a service fee instead of the invoice amount.
- 2The financier takes the risk of default and if Alpha-Delta Limited fails to pay, the financier can recover the money from the MSME supplier under the recourse clause.
- 3Alpha-Delta Limited is legally bound to pay the full amount of the invoice to the financier on the due date and the MSME supplier has no further role in the payment collection.✓
- 4Alpha-Delta Limited remains liable to pay the MSME supplier directly at the end of ninety days and the MSME supplier then pays the financier.
Correct answer
Alpha-Delta Limited is legally bound to pay the full amount of the invoice to the financier on the due date and the MSME supplier has no further role in the payment collection.
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