A recent study by the European Central Bank highlighted that
there has been a “considerable worsening” of access
to credit for small and midsized businesses. A new financing firm
is hoping to tap into the market of cash-starved entrepreneurs by
offering instant working capital to traders operating on online
marketplaces.
With major high street banks still reluctant to lend, Iwoca says
it provides an innovative solution to online retailers looking to
expand their business. Take Nicholas Dummigan of NDOline Retail,
for example. He started selling packaging supplies via an eBay,
Play.com and Amazon shop, as well as through his own site
packaging-group.co.uk in late 2010.
Dummigan started with mailing bags, first single size, then more
sizes followed by a range of cellophane bags. With sales
increasing rapidly, Dummigan invested heavily in logistics and
technology as well as extending the range to make the most of
high-volume selling-a tactic that required a level of investment
over and above the monthly profits.
Deterred by the requirements, time and frustrations of going to a
traditional lender, Dummigan came across London-based Iwoca, a
finance company founded by finance and technology professional in
March 2011. Iwoca offered Dummigan a three months £2,500
working capital loan, enabling him to introduce envelopes to the
product range. The cash injection help the business increase
sales and profits by 15 percent.
“Iwoca combines the enormous growth opportunity in
ecommerce with the lack of available funding to small businesses
in general and to etailers in particular,” says Iwoca
founder Christoph Rieche. To assess credit risk, Iwoca uses
applicants’ eBay and Amazon online trading history and feedback
scores–data sources that are not considered by the major high
street lenders. Further, unlike banks, Iwoca processes
applications 24/7 through its online portal. Applicants receive
estimates within 55 seconds of signing up with approval and
transfer of funds happening within the same day.
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