What Is Invoice Discounting?

Invoice discounting is a type of financial arrangement where a business sells its accounts receivable (invoices) to a third-party financial institution at a discounted rate in exchange for immediate cash. This type of financing is typically used by businesses that have outstanding invoices from their customers but need immediate cash to meet their working capital requirements. Jiraaf is one of the popular invoice discounting platforms in India.

Jiraaf being the horizontal platform provider for alternative fixed-income products saw a significant rise in the sale of its product offerings in the post-pandemic world.

Founded in September 2021, in a short span, Jiraaf has enabled INR 1000+ crores of investment on its platform as of Jan 2023 and has recorded 15x growth in the last year alone. Jiraaf has not only proved itself as the go-to alternative fixed-income investment platform but has also gained confidence & trust from investors and partners with high customer retention and repeat usage.

Our investors earn annualized yields between 8% to 20% for a period between 30 days to 3 years across various product categories all via an easy-to-use convenient digital platform. The best part of it all is that most of our fixed-income opportunities require a minimum investment of just INR 1 Lac.

Jiraaf has processed repayments of over INR 550 crores so far with zero defaults to date. We are thankful to our investors for supporting us in our journey towards building a reliable, robust, and diverse digital fixed-income platform.

Founders Saurav Ghosh and Vineet Agrawal have made it their mission to make fixed-income opportunities affordable and accessible to everyone. They function with the conviction that customer trust is the greatest asset and must be nurtured consistently with transparency, product innovation, and platform’s ease of use. The core culture of the team revolves around customer feedback and addressing their needs.

Looking at the future, Jiraaf aims to build & expand on our digital capabilities, build new partnerships, and curate more quality fixed-income opportunities for our investors. Read More.

Benefits of alternative investments:

• Offers Higher Returns
• Less Volatility
• Broader Diversification
• Easier to Beat Inflation
• Offers higher returns

When we invest in anything, we often look at its past performance and rate of return. Thus, many investors get drawn to the potential returns offered by alternative assets. While returns can never be guaranteed, be it traditional or non-traditional assets, alternative assets show the potential to offer higher returns. We have all heard high risk equals high returns, the same is the case with alternative investments.

Decisions taken only on the basis of % returns could be extremely misleading. What’s equally critical to understand is how those returns are calculated. Learn more about how XIRR is different from the regular (absolute) returns here.

Less volatility

Traditional markets have high volatility and long drawdowns like the 1914 and 2008 crashes. Unlike the traditional methods, alternative investments rely more on the strength of each specific investment, and rarely on broad market trends. Thus, alternative assets potentially reduce the overall risk of a portfolio.

Broader diversification

With little to no correlation to traditional asset classes, alternatives can be a beneficial way to diversify the portfolio.

Easier to beat inflation

Most investments, like fixed deposits, seldom manage to beat the inflation rate. Broadening your portfolio with alternative assets is a great way to potentially receive higher returns. When we speak of the benefits of alternative investments, we cannot speak about the Yale endowment model.

What is the Yale Endowment Model?

The Yale Endowment Model is an investment approach. David Swenson and Dean Takahashi invented the Yale Endowment Model to make strategic investments in Ivy League universities. It has been over 50 years since the inception of this Model and many investors have benefited from it.

The approach has a simple fundamental wherein it suggests spreading risks and avoiding safe bets by spreading the capital across different investment options. It involves diversifying a portfolio into 5-6 equal parts invested in different asset classes.

Swenson and Takahashi developed this model to make the most use of the ability to invest very often, take maximum advantage of tax exemption, and make investments into venture capital funds, upcoming and modern technology, and other hedge funds. The Yale Model gained popularity due to its success rate and rare investments made across these types of assets. Many investors prefer the Yale Model as it allows investors to spread their capital and ease diversification while attracting high returns.

However, now the real question is why were alternative investments alien to common investors?

Traditional investment options are the most discussed in India. Be it on news channels, investment channels, individual groups, or even with friends and families. The non-traditional investment options were considered too risky and not everyone’s cup of tea. All that is changing now. With the new technology and investment education channels a lot is changing. Insights about alternative investments are openly shared and anyone who is interested in the same can research and understand alternative investments.

Thus today, an investor can look beyond the traditional investment options and choose alternative investments.

Where there is demand, supply is not far behind. A lot of platforms have emerged in the last few years that help retail investors smoothly invest their capital in alternative assets. Platforms like YieldStreet, FundRise, Artivest, Rally, Wefunder, etc are some of the top platforms specializing in alternative investment options.

While anyone can invest in alternative assets today, many still believe alternative assets are not everyone’s cup of tea. We also need to look at the risks more seriously.

What are the risks involved with alternative investments?

Liquidity

The biggest risk associated with alternative investment is liquidity. With traditional investments it’s easier to square off your position, the same cannot be done in the case of alternative investments. There is no guarantee that you will be able to sell your investments when you want to. With alternative assets, fund managers may only allow quarterly redemptions or there may be a lock-in period. Due to this, investors will not get access to their money when they need it.

Deal-specific risks

Every deal is different from the next in alternative investment. Thorough research is a must while investing in alternative assets to avoid deal-specific risk. What’s the lock-in period, what’s the past performance, what does the future hold, how much return are you expecting, how and when can you start withdrawing your profits or capital, and can you trade off your deal? One must get answers to all such questions and more while investing in alternative assets.

Alternative investment platform

Choosing the right alternative investment platform is equally crucial. You don’t want to end up in a rocking boat. You must check the background of the platform, ask friends/family if they have used the platform before, check social media for its reviews, and more. Due diligence regarding the platform is as important as understanding the investment options. Click here to know more about the alternative investment.