The Commonwealth Bank is targeting $1 billion in invoice financing as it returns to the controversial sector as part of a bid to compete with the market leader, National Australia Bank, in business lending.
Debtor financing – also known as invoice financing – allows a small business to access funds off unpaid invoices, with the account receivable used as security for the short-term loan. NAB offers the working capital product, but on the whole, major banks have underinvested in the technology used to assess the risk, opening the market to specialist players such as Scottish Pacific, Octet and, before its collapse, Greensill.
Regarding risks in particular sectors, CBA’s impaired business loans are mostly in home building and construction, but he said better weather and improvements in supply chains, including falls in the price of shipping, would help the sector recover. In retail, the biggest risk remains too much inventory.