Case Study: BBVA x Payflow
Jun 4, 2024
How Fence revolutionized debt management for startups and capital providers
What Payflow gained
Incremental growth capacity through more efficient, on-demand capital access
Savings of 30%+ in interests through our on-demand capital management platform
Savings of up to 80% in back office through automated debt facility operations
What BBVA gained
Increased control over risk exposure and compliance through real-time access to facility information and code-enforced contracts
80% reduction in back office costs through automated payments, reconciliation and reporting
Increased capital efficiency through automated waterfall management and instant disbursements
The Deal
€20m senior tranche in an asset-backed revolving facility
The Capital provider
BBVA Spark - BBVA’s unit traditionally focused on Venture Debt, Growth Debt and Commercial Banking, now developing warehouse financing capabilities in partnership with Fence. Spark targets scalable, innovative technology-enabled high growth businesses
The Borrower
Payflow - Payflow’s platform allows its clients’ workforce to access earned wages and tax-free flexible benefits. Payflow's goal is not just to be an on-demand payroll application, but to develop a financial wellness platform for employees
The Challenge
BBVA needed to remain the most attractive option to Payflow while managing its risk exposure
In today’s fast-evolving financial landscape, banks face a pivotal challenge: they must be agile to work with fintech firms that offer instant, automated capital services; yet they're also held to stringent risk management standards that restrict their offerings. Establishing asset-backed lending helps banks comply with their capital efficiency and risk policies but is a slow, operationally heavy process requiring extensive and costly operations
Payflow required on-demand capital and prepayment capabilities
Capital efficiency is core to Payflow’s sustainable growth: every Payflow transaction generates a short term receivable that needs immediate financing. Historically, Payflow relied on a mix of venture debt and equity, with outsized cost of capital and suboptimal capital efficiency. Setting up an asset-backed facility with access to immediate capital drawdowns and prepayments was an unmanageable operative challenge with very high back office costs associated.
The Solution
Asset-backed revolving credit facility, enabled and automated by Fence
BBVA Spark and Payflow leveraged Fence’s technology to set up a revolving credit line backed by Payflow’s receivables.
Fence, as the SPV operator and cash manager, digitized the credit agreement, integrated via API with several stakeholders, automated borrowing base calculation and cash management through smart contracts, enabled real-time covenant monitoring, and automated facility reporting. All this, at a fraction of the cost.
Fence makes sure the facility is compliant with the credit agreement in real time (e.g., assets are within predefined eligibility criteria, covenants and concentration limits are met) while significantly simplifying operations and reducing costs.
Fence’s platform automation is supported by the latest technology, including digitalization of the credit agreement, API integration with different stakeholders, and automated cash management via smart contracts.
This solution not only provided Payflow greater financial flexibility and streamlined its operations through efficient receivable management but also showcased BBVA’s commitment to innovative financing for growth companies.
The Results
Achieving operational efficiency and cost reduction through flexible financing
Fence’s technology allowed BBVA Spark to finance Payflow’s growth while efficiently managing its risk.
This new automated facility resulted in a symbiotic relationship that propelled both entities towards achieving their strategic objectives.
BBVA successfully secured the deal, reducing indirect capital costs by a staggering 80% and significantly boosting back-office efficiency & effectiveness. The credit facility managed 100k transactions a month, 100% of which were validated and verified instantly. This real-time monitoring capabilities, allowed for unparalleled risk management and operational oversight at a fraction of the cost.
Meanwhile, Payflow gained access to flexible and cost-effective financing that supported its ambitious growth plans. The ability to draw down capital on demand and prepay debt contributed to ~30% reduction in interest expenses and led to a 10%+ increase of the advance rate.