Research from iwoca, one of the UK's largest small business lenders, reveals that embedded finance – financial services that are offered via API integrations with partner companies, traditionally non-financial – increases the chances for successful loan application for small businesses by 58%.
iwoca has partnerships with 20 companies such as accounting software and digital neo-banks, including Xero, Tide and Funding Options. Businesses can access loans from iwoca directly from these providers' platforms, with nearly 30% of all loan applications to iwoca now coming through such embedded finance partners.
This makes SME loan applications far simpler, as loan offers are readily available in the services they use day-to-day. In addition, these platforms hold much of a company’s financial information - such as cash flow and trading performance data- that a lender would need to review a loan application. This allows the ultimate lender to make faster decisions and to tailor products to a customer’s individual needs, which translates to greater chances of getting approved for finance.
In addition, small business applications via embedded finance partnerships are 58% more likely to be approved than those that applied to iwoca directly.
Colin Goldstein, Commercial Growth Director at iwoca, said: “The technology behind embedded finance has huge potential for SMEs, and the possibilities to embed finance are vast. Small businesses are already benefiting from embedded finance through faster and more successful loan applications."
Access to finance for SMEs is key, however with the closure of the Bounce Back Loan Scheme, many high street banks are likely to reduce their lending to small and micro businesses, as their risk appetite narrows. Alternative lenders can fill this gap, with embedded finance integrations providing small businesses with simple access to the finance they need.
iwoca is one of Europe’s largest small business lenders and was founded in 2012 by CEO Christoph Rieche and CTO James Dear, both with backgrounds in finance with Goldman Sachs and Deutsche Bank respectively.
Since launching, iwoca has made finance available for over 50,000 businesses of all shapes and sizes, issuing over £1 billion in funding, a long way since iwoca's very first small business loan of £5,250 in March 2012. Over the past seven years the company has become of the fastest-growing business lenders in Europe, and now has a team of more than 300 in London and Frankfurt.
Other alternative finance providers in the UK include Boost Capital, Capify, Funding Circle, Shawbrook Bank, Spotcap or ThinCats.