Iwoca, which claims to be one of Europe’s largest SME lenders, has announced a £270 million package of debt funding. Made up of £150 million from Citibank and Insight Investment to fund expansion in Germany, and £120 million from Barclays and Värde Partners for the UK. It takes the total investment for iwoca to more than £1 billion, followed by a £200m in funding from Barclays and Värde Partners in October last year. The investment will support iwoca in meeting the growing demand for finance from SMEs.
A constant through thick and thin
Founded in 2012, the London-based small business lender has seen some tough economic times. “The company was founded to meet the needs of post-recession SMEs,” iwoca’s spokesperson told TFN. Since then, they’ve helped SMEs through the tribulations of Brexit and a global pandemic. “For 10 years now, we’ve been developing tech that meets the needs of an underserved market. From deploying open banking solutions to make processes smoother, to leading the way in B2B pay-later solutions, we’re in a process of consistent innovation, driven by a single-minded focus on supporting small businesses through the very best tech.”
Many people do not realise that SMEs, collectively, are the backbone of national economies. “There are 5.5 million SMEs in the UK – all with different needs and goals,” iwoca said. “Our loans go towards everything from expansion to new technology, increasing stock to our b2b buy-now-pay-later product, iwocaPay, being used to streamline cash flow.”
Since being founded, iwoca has lent SMEs more than £3 billion. And the finance they provide is often vital to SMEs, who often have limited working capital and find that traditional high street lenders are increasingly reluctant to finance SME growth. Iwoca’s SME Expert Index found that 76% of brokers reported that high street banks were reducing their funding for SMEs, despite 86% of them expecting demand to increase.
Helping SMEs navigate continued change
“The last few years have seen significant economic uncertainty for so many SMEs across the UK and Europe,” iwoca’s spokesperson told us. The cost-of-living crisis did not just affect people. Businesses were caught in a pincer; their costs were increasing, but they also felt pressure from their clients to keep their prices low. “It’s clear that the effects of long-lasting inflation are continuing to impact businesses, even as the rate of cost increases slows,” iwoca continued. Their SME Expert Index backed up that feeling, with two-fifths of the brokers saying that high costs were the primary concern of businesses.
The role of specialist and challenger lending for SMEs has been growing. The British Business Bank’s annual report found that it now account for nearly three-fifths of the leading market.
Iwoca’s loan book is evidence of the continued demand. The first quarter of this year saw them break their record, lending more than £200 million to 9,000 businesses across the UK and Germany. Behind each of those loans is an SME that might not otherwise have been able to access capital. “This is why we’re so passionate about our continued expansion, helping more and more businesses to access the capital they need to expand,” iwoca’s spokesman said.
A core feature of iwoca’s offer is its accessibility. With loans available through a range of platforms, like Qonto and Countingup, and decisions often made within minutes, they offer SMEs a level of service that is more typically associated with consumer banking.
Christophe Rieche, iwoca’s co-founder and CEO, said, “this investment will enable us to keep up with the high demand from small businesses for our Flexi-Loan product.” He also outlined how their experience from the past twelve years allowed them to lend at a time traditional finance was shrinking. “With more than 130,000 small business loans processed, we have ample data to build market-leading risk models. This data-driven approach also allows us to lend to businesses that are outside the restrictions imposed by the high-street banks, especially when they don’t have multiple years of trading.”
Helping a million businesses
Having helped businesses through twelve turbulent years, iwoca has proven its commitment to SME finance, and plans to massively increase the number of businesses they have helped. “A big milestone on our horizon will be to finance one million businesses,” their spokesman told us. “We’ll get there by continuing to make our finance ever more relevant and accessible to more businesses by combining cutting-edge technology, data science, and a seamless customer experience.”
And, because of the importance of SMEs, iwoca’s impact goes far beyond the businesses they support, through the employment and trade their loans make possible. Iwoca’s spokesman told us, “we’ve proven the value of fast, flexible finance in empowering small businesses to manage their cash flow better and harness growth opportunities — making their business and the economy stronger as a whole.”
