- Startup helps large corporations and SMEs optimise their working capital using technology
- Many SME, MSME suppliers in Malaysia have to wait 50% longer to collect their payments
NEARLY two years ago, three Malaysians Ang Xing Xian (pic, above), Dion Tan and Edwin Tan co-founded CapitalBay, a multi-bank supply chain finance platform which helps large corporations and SMEs optimise their working capital using technology.
The company recently announced the completion of its RM2 million (US$476,823) seed funding round led by KK Fund.
Having previously worked at an invoice financing start-up in the UK, CEO and co-founder Ang Xing Xian witnessed how SMEs were accelerating their business by gaining access to smart working capital.
CapitalBay aims to play a more supporting role in advancing Malaysia’s supply chain finance ecosystem by improving the overall cost-efficiencies.
“While there has been growing interest from financial institutions, Malaysia’s supply chain finance scene is still in its infancy stage and facing a unique set of problems. We aim to support the industry’s growth through our technology, legal and operational infrastructure,” said Ang.
Problems in the market
From a pure business perspective, if you are a seller, you would want to collect payments immediately; on the other hand, your buyer would want to hold on to cash for as long as possible.
The two sides of the same transaction are never aligned. As a result, large corporate buyers will almost always end up having a long payment term for their small suppliers who have no negotiating power.
According to CapitalBay’s analysis, many SME and MSME suppliers in Malaysia have to wait 50% longer to collect their invoice payments today compared to just three years ago, with more than RM100 billion in working capital trapped in their receivables.
While receivable financing and loans already exist in the market today, these options are often expensive with strict requirements that usually need upfront collateral – a mismatch for smaller businesses that do not tick all the boxes.
CapitalBay was established to work with financial institutions in solving the increasing funding gap often found in some of the largest supply chains in Malaysia.
Supply chain management technology as the solution
Through its technology and legal infrastructure, the CapitalBay platform allows SME suppliers to receive early payments at extremely attractive rates from liquidity providers leveraging on their buyers’ credit strengths, with no collateral required.
Simultaneously, large corporate buyers can extend their payment terms in a sustainable manner and reduce overall costs in the supply chain.
Alternatively, buyers who are cash-rich may choose to self-fund their supply chains to earn a high return on their idle cash, essentially risk-free.
“Suppliers request early payment of their approved invoices at a rate that works for them, and buyers indicate their cash availability. CapitalBay’s proprietary algorithm will then route and match the orders, at the same time automating all other related operations,” explains Ang.
Going beyond the digital marketplace concept, CapitalBay serves as a platform that connects multiple financial institutions to a large network of corporate supply chains through one single implementation process that reduces the need for capital expenditure in technology development, on-going transactional support and execution.
At the same time, cost-efficiency of supplier on-boarding can also be significantly improved.
A combination of security features, proprietary risk algorithms, credit assessment, and trade data analysis allows CapitalBay to offer a secure platform for all stakeholders to take advantage of customisable supply chain finance programmes.
A triple-win outcome
As a result:
- Corporate buyers increase cash flow and earn high risk-free returns on idle cash while being a responsible purchaser,
- SME suppliers get additional affordable and sustainable financing, and
- Financial institutions gain exposures to a low-risk financial asset while supporting the economy
So far, CapitalBay has completed multiple transaction cycles with its initial Bursa-listed buyers, who collectively hold more than RM2 billion worth of accounts payable.
"The supply chain finance market is a potentially huge market (more than US$2 trillion opportunity globally), but due to the complexity, it is still largely untapped in Southeast Asia. CapitalBay is the one, and only player who is minimising this complexity, in Southeast Asia and this would be an excellent opportunity for both buyers and suppliers," said KK Fund general partner Koichi Saito.
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