Support for Alternative Trade Instruments (Export Factoring) under Niryat Protsahan for MSME Exporters

Facing Delayed Payments and Working Capital Constraints?

Exporters frequently have to wait for an extended period of time (i.e., 30-90 days) before receiving payment. This creates cash flow deficits and relies on traditional bank lending. This can delay re-investing in their business, it limits the exporter’s ability to execute orders, and therefore, impede export growth.

Export Factoring is a faster and more flexible form of finance than traditional forms of finance. It enables exporters to release monies that are locked up as accounts receivable.

What is Support for Alternative Trade Instruments?

Under the EPM, this new initiative, “Support for Alternative Trade Instruments,” aims to develop alternative, modern trade finance options available to MSMEs.

This scheme will provide a subsidy for the interest rate that exporters pay on their export factoring transactions, which can be utilized as short-term working capital using factoring arrangements governed by either the RBI or IFSCA. This means exporters are able to receive quick financing while lowering the costs associated with it.

What is the Actual Benefit for Exporters?

The scheme directly improves liquidity and reduces financing costs for exporters.

Key Benefits:

• Interest subvention of 2.75% on factoring cost
• Faster access to funds against export invoices
• Reduced dependency on traditional bank loans
• Improved working capital cycle and cash flow management

Example:

• Invoice Value: ₹1 Crore
• Immediate liquidity through factoring (up to ~80–90% advance)
• Reduced financing cost due to subvention

This enables exporters to convert receivables into immediate working capital without waiting for buyer payments.

reduce export financing cost further through interest subvention schemes

Who is Eligible?

• MSME exporters engaged in international trade
• Valid Importer Exporter Code (IEC) (not in Denied Entity List)
• Valid Udyam Registration
• Exports under eligible HSN tariff lines
• Factoring transactions through RBI or IFSCA regulated entities (banks, NBFCs, fintech platforms)

Documents Required

• IEC Certificate
• Udyam Registration Certificate
• Export invoices
• Shipping bills
• Factoring agreement or transaction proof
• Bank account details

How to Claim Export Factoring Support

1. Submit intent on the DGFT portal
2. Generate UIN (Unique Identification Number)
3. Select a factoring partner (bank / NBFC / fintech)
4. Execute export factoring transaction
5. Factor submits claim through the designated system
6. Subvention amount is credited to the exporter’s bank account

Note: UIN is mandatory and typically valid for one financial year.

access collateral support for export credit without heavy collateral requirements

Important Conditions to Know

• Applicable only for export factoring transactions
• Eligible only for notified HSN tariff lines
• Interest subvention rate: 2.75%
• Maximum benefit: ₹50 lakh per MSME per financial year
• Applicable only for transactions undertaken on or after 20 February 2026
• Not applicable for:
  • SEZ exports
  • Deemed exports

What Transactions Are Covered?

The scheme supports a wide range of export factoring transactions:

• Recourse and non-recourse factoring
• Transactions in INR or foreign currency
• Factoring arrangements through RBI / IFSCA regulated entities

This flexibility allows exporters to choose financing models based on their risk appetite and buyer profile.

When Should You Use Export Factoring?

Export factoring is particularly useful when:

• Payment cycles are long (30–90 days or more)
• You have repeat or reliable international buyers
• Immediate liquidity is required for operations or scaling
• Access to traditional bank credit is limited or slow

How Afleo Helps You Access This Scheme

• End-to-end eligibility assessment
• UIN generation and DGFT compliance support
• Identification of suitable factoring partners
• Documentation and transaction structuring support
• Coordination with financial institutions and factors
• Claim tracking and follow-up for timely benefit realization

Maximize benefits and avoid compliance errors with expert guidance.

Speak to Export Incentive Expert

Why Export Factoring Support is Important

Export factoring support enables MSME (Micro Small Medium Enterprise) exporters to avoid the traditional and typically much slower financing options available for exports, and choose from a variety of faster, more flexible trade finance products that are designed to provide improved cash flow. Improved working capital, reduced funding cost, increased business scalability, better operating efficiencies and greater participation in international trade are some benefits that can be realized by using this product.