The Commonwealth Bank of Australia (CBA) is tapping automation capabilities from Xero-owned fintech Waddle for a new product that enables businesses to see their credit limits adjust in “real time” based on the value of their outstanding invoices.
CBA’s new product, christened Stream Working Capital, allows businesses to secure loans using outstanding invoices – a method also known as “invoice financing”.
Funding through the new scheme will be up to 80 per cent of the value of a business’s unpaid invoices.
Stream Working Capital will be rolled out nationwide this month, following a limited launch earlier this June with selected small businesses.
CBA executive general manager of business lending Clare Morgan promoted the new solution as offering “digital working capital” to customers.
“It’s about moving away from the more traditional forms of lending and moving towards unlocking some of the value that’s trapped in assets such as receivables and inventory,” Morgan said.
In contrast to traditional invoice financing – a process regarded as manual and slow – Stream Working Capital will offer faster funding to businesses, with credit limits calibrated based on a live feed of customers’ invoicing data, she explained.
“It’s transparent, available 24/7 and offers very fast funding, with a turnaround time of 72 hours, compared to an industry standard of several weeks,” Morgan said.
Indeed, the new digital solution’s speed comes down to Waddle’s integration with cloud-based accounting software such as Xero – which acquired the fintech in June 2020 for $80 million – as well as MYOB and Intuit QuickBooks.
As a result, CBA said the new product would help small businesses pay suppliers or hire employees, providing consistent access to capital that would otherwise be “locked up in their invoices”, Morgan said.
“[This is] an essential part of helping small businesses recover and grow as the economy starts to reopen and businesses navigate this new operating environment,” Morgan said.
Data from Australia’s March 2021 SME Growth Index showed that three-quarters of small businesses reported experiencing cash flow issues despite extensive loan support programs instituted by the Federal Government.
Corroborating this, CBA in a statement cites research revealing that two-thirds of business owners are frustrated by “uneven cash flow”, whilst three quarters revealed that cash flow issues are limiting their ability to fulfil large orders.
Critically, 60 per cent of business owners were said to feel “at the mercy of customers paying on time”, according to the Commonwealth Bank.
In addition, CBA’s proprietary research revealed that 41 per cent of businesses would be more likely to use invoice financing if it were “integrated into their accounting software”; 71 per cent of businesses have little or no knowledge of how invoice financing works.
Starting this week, CBA is allowing business customers (classified as B2B customers issuing invoices to the value of $15,000 or more per month) anywhere in Australia to apply for Stream Working Capital; details for the service be found here.
In the future, the bank aims to expand Stream Working Capital’s capabilities to allow businesses to secure funds against stock and inventory, in addition to unpaid invoices.
Founded in 2014, Australian-born Waddle has also notably partnered with the UK’s Royal Bank of Scotland (RBS) since 2019, with services provided to the bank’s small business clients across UK and Ireland.