Small and medium sized businesses have it rough when it comes to lending, and iwoca is out to fix that.
The London-based startup, founded in 2012, argues that banks are not very well setup to cater to SMBs.
“Traditional credit models don’t work for small businesses,” Christoph Rieche, CEO of iwoca, told Bank Innovation. “Our platform enables us to create a unique credit profile for each customer, and we do it in a much more digital, systematic way, which allows us to underwrite traditionally underserved customers.”
The lender is on a mission to sign 1 million small businesses; to date, the company has lent to 10,000 customers. Originally launched in the U.K., iwoca has expanded to Germany, Holland, and Spain in the past two years, with more expansion plans on the roadmap.
Last month, the company partnered with the accounting giant Xero, allowing customers to link their accounting software to an iwoca account, in order to apply for credit or even withdraw funds.
“Those kind of partnerships, both with fintechs and banks, are crucial to our strategy, and our growth ambitions,” Rieche added.
This alternative lender wants to make sure that the opportunities of the financial world aren’t locked to all but a “privileged few.” Started out in 2013 with a focus on student loan refinancing, the lender uses data science and automation on its platform.
The company, which now also offers personal loans, looks over a user’s financial history, education, employment records, and credit score in order to match them with a new loan, or one with a better rate. For each loan applicant, Earnest analyzes between 80,000 and 100,000 data points to provide a personalized interest rate. This process means that clients typically end up with shorter terms, better rates and money saved, an Earnest spokesperson told Bank Innovation.
According to the spokesperson:
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Earnest is contributing to wider trends disrupting the traditional lending space by not only providing loans online but actually underwriting those loans differently. Other players have expanded their underwriting algorithms, and we have strived to take this to a new level.
We’re committed to continuing this level of innovation and personalization for our clients by expanding into new services and products within the coming year.