iwoca expands market-first Open Banking revenue based loan
iwoca, one of Europe’s largest small business lenders, has today announced the expansion of its merchant cash advance product to small businesses to all businesses accepting card payments in the UK. The merchant cash advance will enable small businesses to repay their loan based on their sales and stay in control by choosing what percent of their revenue to pay.
SMEs frustrated by lack of flexibility from other loan providers
This product expansion comes following a successful integration with FundingXchange, launched in September, which offered revenue-based finance loans between £1,000 – £50,000 to online sellers on eBay.
The decision to expand comes as the majority of small business owners (87%) using loan products suggest that a revenue-based loan, such as iwoca’s merchant cash advance, would be better or the same as using a term loan. The ability to change payments depending on business performance is a key benefit, with over half (55%) of SME owners surveyed by iwoca saying that a finance provider’s flexibility in traditional overdraft facilities presents a challenge.
Flexible loan to benefit businesses with seasonal fluctuations
The merchant cash advance is a flexible loan that enables businesses who experience volatile swings in demand to stay in control of their finances, and will be particularly beneficial for those businesses operating in retail, hospitality and e-commerce. This product comes at the perfect time as many businesses experience significant swings in sales over Christmas and the New Year.
The merchant cash advance also offers flexibility to businesses affected by continued economic uncertainty, with supply chain and staffing issues making it difficult for businesses to plan. In addition, the revenue based loan can drive growth for scale-ups whose revenue growth may come months after finance is secured – an effective alternative to venture capital or private equity funding.
Colin Goldstein, commercial growth director at iwoca, said: “At iwoca, we’re transforming small business lending through brand new innovations powered by Open Banking technology. With our merchant cash advance product, SMEs across the country can now repay their loans in line with the seasonal flow of their businesses. As small businesses recover from the pandemic, iwoca will give them the flexibility they need to scale their business.”
Since May 2020, iwoca has successfully lent close to £400m to SMEs across the UK via the government’s Coronavirus Business Interruption Loan Scheme (CBILS). In Q1 2021 iwoca represented nearly 10% of all CBILS loan approvals by value. Most recently, iwoca has been accredited by the British Business Bank as a lender under the Recovery Loan Scheme (RLS) which will allow businesses to access loans of up to £10 million to help them recover from the pandemic.
In June 2020 iwoca launched iwocaPay – an online buy now pay later invoice checkout to help small businesses get paid. The lender is also reaching up to 2 million businesses across the UK and Germany through its embedded lending technology, which allows businesses to access loans through a range of platforms such as accountancy software apps and digital neo-banks. iwoca recently partnered with the online therapy platform Spill to launch free mental health support – which will be available for all small business owners. Small business owners can sign up for their free video therapy session here.