Christoph Rieche is the CEO of iwoca, an innovate startup which provides working capital for online traders. Â I bumped into him at Channel advisor catalyst and interviewed him about his business.
Please tell us a bit your company.Â How did you come up with the idea?
iwoca is a financial startup lender dedicated to eBay business sellers and other online marketplace retailers. Weâ€™re proud to be the first in the UK to provide this service.Â E-Commerce is growing and growing and growing, banks are becoming less and less and less interested in small businesses, I added one to the other and realised that this is a real business opportunity.
How is business at the moment?Â
Really encouraging. We launched in March and weâ€™re seeing great interest in our offering. eBay sellers of all sizes appreciate the support we give them. Hearing their unique stories is fantastic and it’s a great feeling to contribute to their success.
Loans to small business are in the news a lot.Â Have you got any support from government?
There has been a significant amount of news coverage covering this topic. It is widely known that small businesses have challenges gaining access to capital. And online retailers specifically are feeling hard pressed as they are frequently cut off from lines of credit due to bank lending being in decline. In addition to that, their suppliers are also seeing their credit lines cut by banks which puts additional pressure on the entire system.
We have yet to get government support for our initiative. This is something we would like to pursue and we are looking to work in partnershipwith like-minded businesses that would like to support the growth of onlineretailers in the UK.
How long does it take? What is the process?
You have the funds in your account the same day of the application, we are really fast! In less than 55 seconds of sign up you get an estimate of the amount that we can advance to you. Thereafter it takes 45 seconds to enter very basic information about you and your company that we use to finalise our credit assessment. That’s it.
How do you access your customers?Â
Social media, events and forums is critical to us communicating to our customers. Weâ€™re a new company and reaching the right audiences is important to our success.
Your APR seems pretty high!
We charge on average a fixed interest of 5% per 30 days on the outstanding balance. To save costs,Â our customers can pay early without any penalty fees and we do not charge any administration costs, we are giving them full flexibility. To put this in perspective, most payment processors charges somewhere between 1.4% – 3.4% on the transaction amount while the marketplace platforms generally charge in excess of 10% of the sales amount. We take substantially more risk in our transactions and enable sellers to access working capital instantaneously to grow their business. This could be by capturing lucrative trading opportunities, pay a supplier upfront or paying for bills while their merchandise is in transit from China or other places.
Your company seems a bit like Wonga for eBay traders, is that fair?
iwoca and Wonga are technology companies at heart that provide financial services.Â Wonga successfully disrupted the consumer banking landscape by providing a very fast and convenient service that is highly valued by their customer base. However, iwoca goes beyond just providing cash,Â our mission is to engage and inform eBay commercial sellers about how additional working capital can fuel their growth in the long term. We see ourselves as their strategic partnerÂ and help them become more profitable. Our risk assessment is very different too, Â we use non-traditional means such as sellerâ€™s feedback scores, eBay sales or competitive ranking. Last but not least, we are a lot cheaper than Wonga.
What are your plans for the future of the business?Â Will you be offering larger, longer terms loans?
Our first goal is to generate awareness of iwoca by fostering a finance community to support eBay sellers and other online retailers. We currently provide working capital up to Â£20,000 but as we build up longâ€“term relationships with our customers, they will automatically qualify for larger and longer term loans over time â€“ so in other words, as their strategic partner we will grow with them.