Trade Finance, Reimagined
Fund the Stage, Not the Firm
The big questionA new brand carries five different risks, usually on its own balance sheet. What if each could be carried by whoever is best placed to judge it?
If nothing opened, use your browser’s print command (Ctrl or ⌘ + P). The teardown is laid out for it.
The three-minute version
The five risks are these: will anyone want it, will it work, will the batch sell, will it reach people, and will the money come back. Today they usually sit together on one balance sheet. Open networks leave a record at each stage, and this series asks whether that record could let each stage be funded by the party that knows it best, building on every instrument that already exists. Twelve shifts in four acts, each with its sources and the result that would end it.
Can the record an open network keeps of a brand’s journey let each stage be funded by whoever is best placed to judge it, so that more new brands are financed per unit of risk capital without losses rising?
Where things stand.
The question
Imagine a brand that is digital-first. It is found, ordered and paid for through open networks, with stockists and fulfilment nodes close to the customer. It still has to be made, stocked, moved and paid for, and every one of those steps carries a risk.
A new brand’s journey carries five of them, and each is best judged by someone different:
| Risk | The question | Best placed to judge | Retired by |
|---|---|---|---|
| Demand | Will anyone want it, and come back? | Early buyers, creators, a community, a creation fund | Repeat purchase, an acquisition cost that holds, demand in a second region |
| Product | Will it work, and may we sell it? | Assessors, labs, a creation fund | Passed tests, licences, a working prototype |
| Production and stock | Will the batch be accepted and sell within its shelf life? | The manufacturer, a stockist, an inventory financier | A batch accepted, sell-through within shelf life |
| Distribution | Will it reach people and convert? | Stockists, fulfilment nodes, retail partners | Channel conversion, delivery and returns, node sell-through |
| Cash cycle | Will the money come back on time? | A trade-finance provider, a bank | A history of on-time payment |
Cutting across all five are shocks: a recall, a spike in returns, a failed batch. Finance has largely been built around the firm, one instrument at a time. This series asks what it would look like if it followed the journey instead.
Fund the stage, not the firm.
The idea
Offline, these risks were shared through people. In a traditional distribution chain, as we understand it, the brand carries demand and product risk, the manufacturer produces up front, and the distributor carries stock and local credit. The margin is the price of sharing the risk, and the distributor is, in effect, the local bank. A digital-first brand skips that chain, and the risk comes back to it.
Offline, the sharing worked on personal knowledge. A digital-first brand doesn’t have that, so it needs a record in its place.
- Role
- state
- evidence
- the right capital
- released
- recycled
Open networks leave a record at each stage. The idea is to let that record do what personal knowledge did offline: each stage is funded by the party best placed to judge it, and the capital moves on when the risk has been retired. Twelve building blocks make up the shared layer underneath, and each shift adds one.
Think of it as an incubator whose capital arrives in stages, and whose method is published, so that others can run a corridor of their own.
What already exists
| Where | What already exists |
|---|---|
| Open networks | ONDC’s participant roles include buyer applications, seller applications, logistics providers and technology enablers[1]. |
| Invoice discounting | On TReDS platforms an MSME seller can be paid early against an invoice its buyer has accepted. Under the Reserve Bank’s June 2026 Directions, acceptance creates the buyer’s unconditional obligation to pay on the due date, and discounting is without recourse to the seller[2]. RXIL, one of the platforms, reports more than ₹3 lakh crore financed since it began[3]. |
| Guarantees | The Credit Guarantee Fund Trust for Micro and Small Enterprises guarantees collateral-free credit that member lenders extend. It does not lend itself[4]. |
| Early money | The Startup India Seed Fund Scheme, launched in 2021 with a corpus of ₹945 crore, funds proof of concept, prototype development, product trials, market entry and commercialisation through selected incubators[5]. |
| Finance for online brands | Private lenders already lend to online brands against sales data, with repayments that move with revenue[6]. On 8 October 2026 one debt platform announced ₹500 crore for D2C brands this fiscal year, to finance inventory purchases and expansion[7]. |
| Data-led lending | Account Aggregator data enabled an estimated ₹3.82 lakh crore of loans in FY26, about 8.4 per cent of retail and MSME lending by value[8]. The Unified Lending Interface had 64 lenders and more than 136 data services by December 2025[9]. OCEN gave marketplaces and lenders a common set of APIs[10]. |
| Sharing and moving risk | Co-lending lets two regulated lenders share a loan, each keeping at least 10 per cent[11]. Banks may securitise trade receivables of up to 12 months that they have discounted or purchased, subject to the drawee’s repayment record[12]. |
| Distribution credit | In most Indian distribution networks, credit between brand, distributor and retailer is informal[13]. |
Scope. We haven’t mapped how much of this a new, digital-first brand can reach, stage by stage, or how well the pieces connect. Until we do, “finance has largely been built around the firm” is a hypothesis, not a finding. The rows on online brands and distribution credit rest on lenders’ own blogs and a trade-press report.
Twelve shifts, in four acts.
Each shift moves from today’s model to a possible alternative. Open one to see how it would work, the sources behind it, what could go wrong and the result that would end it.
Act 1 · Seeing
See the roles and the risks in a brand’s journey, and who is best placed to carry each.
- 01Follow the roles, not only the firm.Financing firms→Financing network rolesRead →
- 02Risk changes shape at every handoff.One business risk→Risk that moves with the transactionRead →
- 03Put each risk with whoever knows it best.Who holds the capital→Who is best placed to bear each riskRead →
Act 2 · Evidencing
Build the evidence that shows a new brand has earned capital.
- 04Verify what a new participant can do.Claimed capability→Verifiable capabilityLooking for a pilot partnerRead →
- 05Judge the decision, not only the outcome.Outcomes→Decisions in contextRead →
- 06A stockist’s own money is a signal.A stockist’s order→A network signalLooking for a pilot partnerRead →
- 07Let the story behind a payment travel.A payment event→A consented evidence recordRead →
Act 3 · Moving
Let capital, identity and visibility move as the risk changes.
- 08Capital moves on as the risk is retired.One balance sheet→Capital that moves across the networkLooking for a pilot partnerRead →
- 09A record that travels with the participant.Company identity→Portable participant identityRead →
- 10See the risk that lives between participants.Isolated records→A network graphRead →
Act 4 · Building
Measure what matters, then assemble the layer.
The smallest real test.
The set-up
One corridor: a single category in a single region, with perhaps a dozen new brands, a few stockists and one or two fulfilment nodes, a creation-capital fund at one end and a regulated lender at the other. Start with small sums, add one block at a time as the last proves itself, and write every kill threshold down before launch.
What each test would show
| Shift | What is tested | The question it answers |
|---|---|---|
| Shift 1 | Roles | Do performance and losses differ by role enough that role-level underwriting would have done better than firm-level? |
| Shift 2 | Transaction states | Do losses differ by transaction state, and do the recorded states match what happened? |
| Shift 3 | Best-placed bearers | Do risks placed with the best-placed bearers lose less and recover more than the same risks held by one lender? |
| Shift 4 | Capability credentials | Is first-cycle performance more predictable for participants who hold them? |
| Shift 5 | Decisions in context | Does decision-plus-context evidence predict the next cycle better than outcomes alone? |
| Shift 6 | The stockist signal | Do products with a checked stockist commitment sell through better than comparable products without one? |
| Shift 7 | Consented evidence | Does shared evidence shorten decisions and improve loss prediction for a first-time provider? |
| Shift 8 | Capital that moves | Is creation capital released and redeployed faster, without losses rising at the next stage? |
| Shift 9 | Portable identity | Do participants with portable histories get finance faster, on terms that match what they have done? |
| Shift 10 | The network graph | Does the graph flag concentration and correlated losses early enough to act? |
| Shift 11 | Network metrics | Is more trade supported per unit of risk capital, with more new participants financed and losses no higher? |
| Shift 12 | The shared layer | Do all nine conditions hold together, under real conditions, in one live corridor? |
Behind the teardown.
The rules it has to fit, how we would bring it to life, what it would take and how to read it.
How offline trade shares these risks
| Risk | Who carries it offline, as we understand it |
|---|---|
| Demand | The brand owner: advertising, sampling and trade promotions. |
| Product | The brand owner and a contract manufacturer. |
| Production and stock | The manufacturer up front, then the distributor. Claims for expiry and damage go back to the brand. |
| Distribution | The distributor or stockist, then the retailer. The distributor funds warehouse space, vehicles, salesmen and local credit out of the trade margin. |
| Cash cycle | The brand credits the distributor, the distributor credits retailers, and large chains pay later. |
A digital-first brand skips the chain, so all five rows land on its own balance sheet.
Scope. This is our general understanding of packaged-goods distribution, and it will differ by category. The only published support we found is lenders’ own writing that credit in distribution is mostly informal[13]. We haven’t yet checked it with distributors, retailers or brand owners.
The rules this has to fit
The layer doesn’t lend. Lending, discounting, guarantees and securitisation stay with regulated entities. The layer carries evidence and routes exposures to them.
Digital lending. The Reserve Bank’s Digital Lending Directions, 2025 apply to banks, NBFCs and other regulated entities. A lender stays fully responsible for any lending service provider it uses. Loans are disbursed to the borrower’s own account and repaid directly into the lender’s account, with no pass-through or pool account of a third party. Default-loss guarantee cover is capped at 5 per cent of the amount disbursed from the portfolio, must come from a company and must be held as cash, a lien-marked fixed deposit or a bank guarantee[14].
Co-lending. Each lender keeps at least 10 per cent of every loan, and the customer is told who their single point of interface is. The Directions took effect on 1 January 2026[11].
Invoice discounting. Discounting of this kind runs on a platform the Reserve Bank has authorised, for MSME sellers and financiers permitted to undertake factoring[2].
Securitisation. Trade receivables of up to 12 months that a bank has discounted or purchased are eligible when the drawee has fully repaid its last two receivables within 90 days of the due date, which investors must be able to verify. For loans of up to 24 months the originator keeps at least 5 per cent[12].
Data. Consent for a lawful purpose, withdrawal at any point, correction and erasure[15]. The Rules under the law were notified on 14 November 2025, and most obligations take effect around May 2027[16].
Scope. We haven’t mapped pooled capital from investors, guarantees by non-banks or insurance to their regulators, and we haven’t taken legal advice. That comes before any pilot.
How we’d bring it to life
Insight Visualization. Agree what must be true: that the record an open network keeps can let each stage of a brand’s journey be funded by the party best placed to judge it.
Situational Awareness. Map what a new brand in the chosen category can actually reach today. Check how offline trade shares the five risks with distributors, stockists, lenders and brand owners.
Evolution Cycles. Run one corridor on small sums, adding one block at a time as the last proves itself.
Publish the method, so that others can run corridors of their own.
What it would take
Business Building, Product & Technology Engineering, Systems Architecture, Data & AI, Market Presence & Distribution, Business Model Innovation, Finance & Structuring and Operating Model Design, with a creation-capital fund, a regulated lender and the brands, stockists and fulfilment nodes of one corridor involved from day one.
How to read this teardown
This is a Level 1 · Concept teardown: the idea, how it would work and how we would test it. Every figure is sourced and every policy claim is cited, and the sources are listed at the foot of each page. Examples marked illustrative are constructed to explain an idea, and the numbers inside them are not data. No separate evidence review has yet been commissioned for this series, so it does not carry the claim-by-claim evidence ratings that Level 2 teardowns do.
The creators, collectives, stockists and nodes in the examples are invented.
What the evidence supports.
Every claim sits in one of four tiers. Sources carry the status of our last check.
How strong it is
- Established
- The Reserve Bank’s June 2026 Directions let accepted MSME invoices be discounted on TReDS platforms without recourse to the seller, and RXIL reports more than ₹3 lakh crore financed. Credit guarantees for micro and small enterprises exist. Data-led lending is live through Account Aggregator and the Unified Lending Interface. Reserve Bank rules permit co-lending, default-loss guarantees of up to 5 per cent and securitisation of eligible trade receivables. ONDC defines network roles. Private lenders finance online brands against sales data.
- Evidence-supported
- Different instruments already exist for different stages: grants for proof of concept, revenue-based finance for online sales, funds for inventory, invoice discounting after a buyer accepts. That supports the idea that risk changes shape as a brand moves, though we haven’t compared their cost or reach.
- Hypothesis
- That the five risks are the right split; that each is best judged by the party named; that role-level underwriting beats firm-level; that a stockist’s own money is a signal; that capability credentials predict first-cycle performance; that consented evidence shortens decisions; that capital can be released and redeployed without losses rising; that a network graph flags concentration early; that the layer raises trade per unit of risk capital.
- Unknown
- How much of a new digital-first brand’s capital need goes unmet today; how offline trade really shares the five risks; whether a regulated lender, a creation fund and stockists would take part; how the Reserve Bank’s and the securities regulator’s rules apply to pooled capital and guarantees by non-banks; whether a regulated lender would accept evidence from an open network; how large the risk of false financeability is.
Before a pilot we would confirm
- Confirm the current limits and eligibility of the Seed Fund Scheme, the credit guarantee scheme and TReDS before designing the pilot, and whether the Seed Fund Scheme is still open.
- Map pooled capital from investors, guarantees by non-banks and insurance to their regulators, and take legal advice on where a stockist’s commitment to buy ends and a guarantee begins.
- Check with distributors, stockists, retailers and brand owners in the chosen category how credit and risk are shared offline.
- Find out what evidence a regulated lender would accept from an open network, and how the Unified Lending Interface and Account Aggregator could carry commercial evidence.
- Quantify the unmet capital need of new digital-first brands in the chosen category and region, and compare the cost and reach of the instruments that exist.
- Confirm which order and fulfilment states the live ONDC protocol exposes to a third party.
Notes on the evidence
The Reserve Bank’s TReDS, Digital Lending, Co-Lending and bank Securitisation Directions were read as the Reserve Bank’s own text. Rules change often, so the dates are shown.
RXIL’s volume figures are the company’s own, reported by trade media. The Account Aggregator figures are Sahamati’s own, reported by a news agency. The Unified Lending Interface counts come from the Reserve Bank’s Trend and Progress report, as reported by press.
The descriptions of revenue-based finance and of informal distribution credit come from lenders’ own blogs. The ₹500 crore D2C fund comes from a trade-press report of 8 October 2026.
The Seed Fund Scheme was approved for four years from 2021–22. We haven’t checked whether it is currently open.
The account of how offline trade shares risk is our own understanding and has not been checked with distributors.
Sources
- [1]Ministry of Commerce & Industry, Revolutionizing Digital Commerce: The ONDC Initiative (4 January 2025)Checked; a government document
- [2]Reserve Bank of India, Reserve Bank of India (Trade Receivables Discounting System) Directions, 2026 (RBI/DPSS/2026-27/406, 23 June 2026), paragraphs 3, 14, 15 and 20Checked; the Reserve Bank’s text
- [3]CXOToday, RXIL TReDS Crosses Landmark ₹3,00,000 Crore Milestone in Cumulative Invoice Financing (10 April 2026)Checked; figures reported by the company in a media release
- [4]Credit Guarantee Fund Trust for Micro and Small Enterprises, CGTMSEChecked; the Trust’s own site
- [5]Press Information Bureau, 656 Startups Supported by Approved Incubators under Startup India Seed Fund Scheme (SISFS) (figures as of 30 November 2022)Checked; a government press release
- [6]CredAble, How are fintechs powering India’s D2C expansion? (11 September 2024)Checked; a lender’s own blog
- [7]DealStreetAsia, India: Recur Club sets up fund for D2C brands ahead of festive season (8 October 2026)Checked; a trade-press report of a company announcement
- [8]IANS, India’s Account Aggregator ecosystem drives Rs 3.82 lakh crore loans in FY26 (27 August 2026), reporting a Sahamati reportChecked; Sahamati’s own estimates, as reported by a news agency
- [9]MediaNama, ULI Now Live With 64 Lenders, 136 Data Services (5 January 2026), reporting the Reserve Bank’s Trend and Progress of Banking in IndiaChecked; a news report of Reserve Bank figures as of 12 December 2025
- [10]iSPIRT ProductNation, Developer community for OCEN (2020)Checked; an early description from OCEN’s originators
- [11]Reserve Bank of India, Reserve Bank of India (Co-Lending Arrangements) Directions, 2025 (RBI/DOR/2025-26/139, 6 August 2025), paragraphs 2, 10 and 13Checked; the Reserve Bank’s text
- [12]Reserve Bank of India, Reserve Bank of India (Commercial Banks – Securitisation Transactions) Directions, 2025 (RBI/DOR/2025-26/160, 28 November 2025), paragraphs 5 and 11Checked; the Reserve Bank’s text
- [13]Mintifi, article on distributor financing and the working capital cycle (24 August 2026)Checked; a lender’s own blog
- [14]Reserve Bank of India, Reserve Bank of India (Digital Lending) Directions, 2025 (RBI/2025-26/36, 8 May 2025), paragraphs 3, 5, 9, 18, 22 and 23Checked; the Reserve Bank’s text
- [15]PRS Legislative Research, The Digital Personal Data Protection Bill, 2023Checked; a summary of the Bill as passed by Parliament in August 2023
- [16]SCC Online, Digital Personal Data Protection Rules, 2025: key highlights (26 December 2025)Checked via a legal summary; the Rules’ own text not read
Spotted a source we missed or a rule we misread? Tell us what we got wrong.
Looking for a pilot partner
We would most like to test shifts 4, 6, 8 and 12 with a real partner. If one of them fits a pilot you could host, fund or take part in, we would like to hear from you.
The objective isn’t to eliminate risk. It’s to make risk observable, financeable, transferable and recyclable, across a network no single entity owns.