Start-up offers funding to eBay entrepreneurs

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.