Supply Chain Finance (SCF) has emerged as a critical solution for addressing the working capital challenges faced by Micro, Small, and Medium Enterprises (MSMEs) in India9. This financing mechanism provides timely and flexible credit linked to supply chain transactions, enabling MSMEs to maintain smooth business operations and foster growth9. SCF is particularly beneficial as it allows suppliers to receive early payment on their invoices, often at lower interest rates, which directly addresses the persistent cash flow challenges faced by over 63 million MSMEs in India9....

A key advantage of SCF is that it leverages the creditworthiness of a single large corporate entity within the supply chain, allowing smaller businesses to access financing based on the strength of their larger partners' financial standing912. The Reserve Bank of India (RBI) has been instrumental in promoting SCF through initiatives like the Trade Receivables Discounting System (TReDS), which facilitates seamless financing of trade receivables for MSMEs, ensuring improved liquidity1314. Furthermore, Section 43B(h) of the Income Tax Act acts as a crucial enabler by encouraging businesses to make timely payments to MSMEs within 45 days, linking tax deductibility to these timelines, thereby unlocking liquidity for MSMEs13. Financial institutions play a pivotal role by providing the necessary funding and infrastructure for these smoother transactions15.