Cross-border factoring, powered by digital platforms like ITFS at GIFT City, can unlock cash flow and risk protection for Indian MSMEs, making it a catalyst for achieving India’s $2 trillion export ambition by 2030.
Munindra Verma,
CEO, M1 NXT
The cumulative value of India’s exports, goods and services combined, crossed over $210 billion in April–June 2025, marking a 5.94% growth Y-o-Y. Behind this growth are the millions of Indian MSMEs powering the country’s global trade engine, contributing nearly half of these exports. But for many of them, the real hurdle begins after they’ve shipped the goods. With payment cycles from overseas buyers stretching to almost 90–180 days, it creates a cash flow bottleneck that can stall growth, delay new orders, and keep opportunities just out of reach.
India is currently on the doorstep of a new export growth story, with global trade dynamics shifting rapidly and supply chains realigning. While policy reforms, production-linked incentives, and digitalisation have strengthened the country’s manufacturing and export ecosystem. A critical enabler in the global trade remains underleveraged by Indian MSMEs: the cross-border factoring. While this tool holds the key to unlocking the potential for the export of MSMEs growth if used strategically.
Factoring and the Limits of Traditional Financing
Exporters have relied on traditional financing channels such as bank loans, pre-shipment and post-shipment credit, and letters of credit to finance their working capital needs. While these tools have played a significant role, they often come with limitations that leave exporters vulnerable in fast-moving global markets. Loan approvals can be slow, collateral requirements can be stringent, and credit limits are often tied to the exporter’s balance sheet strength rather than the strength of confirmed overseas orders. For small and mid-sized businesses, this means that even with a strong pipeline of export contracts, access to timely liquidity remains a challenge. For an MSME operating on thin margins, such delays can strain cash flow, restrict the ability to take on larger orders, and even risk losing clients to more agile competitors.
Cross-border factoring provides an effective and efficient solution for this issue. It enables exporters to convert receivables into cash almost immediately, typically within 48 to 72 hours, without adding debt to their books, while also transferring the credit risk. Exporters simply sell their international receivables to a factor bilaterally or through the International Trade Financing Services (ITFS) platform, which then collects payment from the foreign buyer when it falls due. The receivable itself serves as security, eliminating the need for collateral and making the option accessible even to asset-light exporters. By leveraging local networks and legal frameworks in both the exporter’s and importer’s markets, financiers can assess buyer risk more effectively. Beyond accelerating payments, this structure also removes uncertainty when dealing with new or less-established overseas buyers.
Liquidity with Risk Protection
The most powerful advantage of cross-border factoring lies in its ability to combine immediate liquidity with built-in risk protection. This dual benefit allows MSMEs to plan production cycles more confidently, commit to larger orders, and expand into new markets without being paralysed by the fear of delayed or lost payments. In highly competitive sectors, ranging from textiles and engineering goods to agricultural commodities, the ability to offer competitive credit terms to buyers while maintaining prompt cash flow can be a decisive edge.
Why Adoption Lags Despite Global Success: The Local Barriers and the Digital Way Forward
Globally, factoring is a well-established trade finance tool, widely used in Europe, the US, China and East Asia to power domestic & global sales. The global invoice factoring market is projected to grow from $2,856.4 billion in 2024 to $7,752 billion by 2034, at a CAGR of 10.5%. Europe accounts for more than two-thirds of the $3.5 trillion global factoring industry.
However, in India, factoring adoption remains modest, accounting for only a small fraction of total trade finance volumes. Several factors contribute to this gap. First, there is limited awareness among MSMEs 15
about how factoring works and how it differs from traditional bank credit. Second, many exporters perceive factoring as expensive, without considering the growth potential unlocked through faster cash flow and reduced payment risk. Third, procedural complexities and the limited presence of specialised cross-border factoring providers have hindered broader uptake.
As India targets an export goal of $2 trillion by 2030, the government is making efforts to build export potential by providing the exporter with benefits under the Make in India program, as well as export promotion initiatives like the New Foreign Trade Policy and the extension of the Interest Equalisation Scheme on pre and post shipment rupee export credit, etc. Another key initiative is setting up India’s first International Financial Services Centre (IFSC) in Gandhinagar’s GIFT City, which can orchestrate international trade financing including factoring amongst exporters, financiers, overseas importers and also trade credit insurers.
Factoring landscape is now beginning to shift with the emergence of digital platforms, particularly ITFS licensed by the International Financial Services Centres Authority (IFSCA) at GIFT City. The ITFS platform is designed to offer a fully digital, transparent, and paperless process, from invoice submission to disbursement, making factoring more accessible, affordable, and efficient.
By enabling factoring of export receivables on collateral-free, without-recourse platforms which connect exporters with financiers worldwide and ensure competitive rates through transparent auction mechanisms. The way forward could include encouraging credit insurance companies in India to launch products similar to those available abroad, allowing factors and banks to cover credit exposures and obtain capital relief. Additionally, policy measures to incentivise existing NBFCs to establish IFSC-based operations and participate in international factoring could further accelerate adoption. With the right sponsorship, digital factoring via ITFS could transform from a niche option into a cornerstone of India’s export financing ecosystem.
Together, these changes can make cross-border factoring more accessible, efficient and impactful, especially for small companies aiming to expand their global footprint.
The Bottom Line
If India is to achieve its ambitious $2 trillion export target by 2030, access to fast, flexible, and risk-protected financing will be as critical as competitive products and pricing. Cross-border factoring, powered by digital ITFS platforms at GIFT City, provides MSMEs with a way to unlock cash flow within days, eliminate payment uncertainty, and compete on equal terms in global markets. With greater awareness, supportive policies, and wider participation from financial institutions, this finance tool could become a cornerstone of India’s export growth — turning liquidity constraints into a launchpad for the next export boom.