The new offering comes more than a decade after the major left the sector
Commonwealth Bank has announced that it will launch an invoice financing product supported by technology from Waddle as part of its efforts to increase business banking market share.
CBA will loan businesses between 40% and 80% of the face value of invoices while charging interest rates in the mid to high single digits under the product, Stream Working Capital.
Clare Morgan, executive general manager of business lending for CBA, told The Australian Financial Review that the bank has set a minimum amount of $50,000 for outstanding invoices and was targeting businesses with a turnover of up to $30 million. However, she said the product was not constrained by functionality or funding, opening the door to serving larger clients down the road.
“Large organisations definitely need invoice financing as well,” Morgan told AFR. “We know that late payments to business is an issue that goes right across the economy. I don’t think of the balance sheet as a constraint.”
The product launch marks CBA’s return to the invoice financing space more than a decade after it exited the sector. In invoice financing, banks lend against outstanding payments rather than buying them outright, which occurs under other kinds of supply-chain finance.
“We think that it’s really important that the customer remains in control of their supply chain,” Morgan told AFR.
CBA is targeting businesses that may not hold real assets such as property to borrow against, and is singling out businesses in the manufacturing, transport and logistics sectors as prime customers, AFR reported.
CBA’s return to invoice financing is the latest in a series of ventures into business banking by the institution. Over the last two years, CBA has added nearly $12 billion in business lending as its rivals have held steady. CBA’s business book has risen from $129.5 billion in April 2019 to $141 billion as of April of this year.
CBA said that the Waddle technology underpinning Stream Working Capital virtually eliminates the risk of fraud while also shrinking the length of the process from a few weeks to only 72 hours, AFR reported. Waddle founder Simon Creighton told the publication that speed was essential in invoice lending.
“We see this as alleviating processes that take time – like automating much of the finance process like credit assessment, underwriting and monitoring,” he said.
The partnership with Waddle is just the latest for CBA, which has also forged partnerships with data science company Quantium, energy provider Amber and e-commerce optimizer Little Birdie over the past few months, AFR reported.
“A lot of what I read pits [banks and fintechs] against each other, and I don’t think that’s the right framework,” Morgan said. “We should be thinking about the partnership model.”
Stream Working Capital is the latest addition to a slew of CBA services as the bank creates an arsenal of products aimed at retaining retail and business customers. The product will be integrated with accounting software such as Xero and will allow customers to apply for financing with the click of a button, AFR reported.
CBA said the product will suit small businesses that do not want longer-term debt and are seeking a solution to short-term cash-flow issues.