If your business needs an injection of cash to tide you over from one order to the next, then it’s worth approaching a specialist lender. In the latest extract from our free ebook 50 Ways to Find Funding for Your Business, Enterprise Nation founder Emma Jones identifies three good sources of working capital for start-ups and growing businesses.
With the name of the company being a play on the words ‘instant working capital’, the two founders of iwoca – Christoph Reiche and James Dear – were driven by the need to offer working capital to online retailers. Iwoca provides fast turnaround, short-term funding that enables business owners to purchase stock and keep the business moving.
In particular, the business is targeting enterprises that sell via eBay and Amazon, and since March 2012 iwoca has lent more than £1 million to small businesses trading on these two platforms. The loans go up to six months with interest of 3-7 per cent per 30 days on the outstanding balance. Decisions are quick (perhaps within minutes) and there are no admin or early repayment fees – only interest which accrues daily. In late 2012 the company raised an additional £2 million in capital which, as Christoph says, “allows us to lend to a thousand new customers – very exciting.”
“In a competitive space, having quick access to additional funding can give the edge and this is what iwoca is about.”
Christoph Reiche, iwoca
“A critical issue for most online sellers is having access to capital,” Christoph continues. “Cashflow shortages can often arise from the effect of seasonality and the requirement of paying suppliers upfront for inventory. In a competitive space, having quick access to additional funding can give the edge and this is what iwoca is about.”
2. Wonga for Business
Offering “fast and flexible short-term loans for your business”, Wonga for Business was launched in May 2012 and currently extends loans of up to 52 weeks to small businesses with a two-year-plus trading track record.
The application process is online and Wonga guarantee a rapid service: “Business applicants simply decide how much they want to borrow, for how many weeks, apply and we calculate the total cost in real-time before they proceed. Once an application is approved, we can deposit the money straight into a business bank account within one business day – and as little as 15 minutes depending on the bank in question. Even collection is hassle-free, as we take a weekly repayment via continuous payment authority using your business debit card on the agreed day for the agreed term.”
In a recent interview, head of Wonga for Business, Russell Gould, explained: “We are the short-term credit experts, having already provided over six million loans to consumers, so helping small business is a natural and exciting progression.”
So far the company has extended loans to franchise owners, online retailers, estate agents, wholesalers, solicitors, high street retailers, hair and beauty salons and business service providers.
3. Funding Circle
If you are a limited company with more than two years of filed accounts with Companies House and a minimum annual turnover of £100,000, you can borrow between £5,000 and £500,000 with Funding Circle, which matches businesses looking for loans with people ready to lend.
More than 1,000 businesses have borrowed via Funding Circle since its launch in August 2010 and the company has been making waves in the finance industry ever since.
The online application form takes around 20 minutes to complete and you receive a decision from underwriters within 48 hours. If successful, the process works like this: “Once your loan request has been approved by our underwriters, it will be posted to our live loan marketplace straight away. This is visible to our whole lender community, who will start offering you amounts of money at their specified interest rate. We call these ‘bids’.
“Lenders can only become part of your loan by offering a lower rate than existing bidders. It means you get the best rate possible.”
As the bids accumulate, your loan progresses towards being fully funded. This usually happens within a few days since there is so much competition between the lenders.
Once you’re fully funded, you can accept the loan, or leave the request live for up to 14 days, during which time lenders will continue to compete with each other to offer you the money you need. They can only become part of your loan by offering a lower rate than existing bidders, therefore knocking them out of the bidding process. It’s a simple process that means that you get the best rate possible.”
In December 2012, Funding Circle was announced as one of the 87 first recipients of funds from the Business Finance Partnership, which sees the government invest in non-traditional lending channels. The government has committed to lending £20 million via Funding Circle.
To date, Funding Circle has extended loans to the value of £70 million and expects this to exceed £100 million in 2013.
And one more to keep an eye on
Personal lender Zopa received £10 million from government, via the Business Finance Partnership, to extend loans to small business. The company confirms on its blog it will be developing a service for sole traders “over the coming months”.
Need to know more about bank funding for your business?
Our FREE ebook 50 Ways to Find Funding for Your Business contains more detail about sources of working capital, along with interviews with loan providers. Download it today!