Microfinancing service offers new option to online sellers
Smaller UK online retailers looking for finance to help them grow have a new potential source of help.
Microfinancing service Ezbob has launched to offer short-term loans of up to £20,000 to online sellers who sell through Amazon Marketplace and eBay. It estimates there are 270,000 such sellers, and the company says it is the first to offer them a fully-automated online decision process that takes minutes rather than weeks to give applicants a decision.
Co-founder Tomer Guriel, a former investment banker and analyst at JP Morgan in New York and Israel, said: “I think the value that we have is basically the fact that we offer instant financing.”
He contrasts the microfinance service with that offered by traditional institutions such as banks, where conventional credit approval can take between five and eight weeks. That, says Guriel, is too slow for online sellers who often need fast access to cash to buy stock at short notice. Banks, argues Guriel, can also struggle to assess smaller players correctly.
Ezbob itself assesses applicants both as an individual and as a business, based on a 12 month track record. It is linked to data sources including Experian, eBay, Amazon and Paypal and its assessment of the business also relies on traditional credit scoring. It charges between 2% and 7% a month in interest and offers finance for between three and six months.
Applicants go through a three-stage registration process. Automated underwriting means that applicants typically get a decision in about 10 minutes.
Currently, says Guriel, around 45% of registered clients have applied for a loan. Of those who apply, close to 50% are approved.
“We’re not a replacement for a bank but another capital layer for sellers” he said. “We’re the best option for instant financing. It’s not cheap but it’s providing an instant solution that a seller needs in order to seize the opportunity.”
Guriel says there is a huge potential market of online sellers trading through Amazon and eBay. Ezbob has started trading in the UK but the ambition is to expand globally. It has identified a fast-growing market of third party, third market sellers currently worth £200bn globally, a quarter of a global ecommerce market worth £800bn. In the UK alone, it is targeting a market that it puts at £10bn.
“What’s interesting about this sector,” said Guriel, “is that this is one of the few industries that has been growing in double digits. It’s fundamentally a very strong market, underserved by traditional financial services.”
Ezbob’s own funding comes from an Israeli fund that put in £1.5m this summer.