Sterling Money Image by InspiredImages from PixabayIwoca, one of Europe’s largest lenders to SMEs has secured a £270 million of debt funding from Citi and Barclays. The funding will enable the company to expand its investment in Germany as it continues to expand across Europe.

This brings the total raised by iwoca to over £1 billion since it was founded in 2012. The funding was comprised of two tranches. The largest, £150 million ($175 million), comes from Citibank and Insight Investments. This will be used to expand the firm’s investments in Germany. The second consists of a further £120 million from Barclays and Värde Partners for its UK business.

These investments follow the £200 million in funding from Barclays and Värde Partners it received in October 2023. Also $170 million from Pollen Street Capital in January 2023.

Christoph Rieche, iwoca CEO and Co-Founder (image credit - LinkedIn/Christoph Rieche)
Christoph Rieche, iwoca CEO and Co-Founder

Christoph Rieche, iwoca CEO and Co-Founder said, “This investment will enable us to keep up with the high demand from small businesses for our Flexi-Loan product. Business owners choose us over high-street banks because we make faster lending decisions, typically within 24 hours, and our loan terms are much more flexible. Both of these features are crucial for small business owners, and are only possible due to the technology we have developed over the last decade.

“With more than 130,000 small business loans processed, we have ample data to build market-leading risk models. This data-driven approach also allows us to lend to businesses that are outside the restrictions imposed by the high-street banks, especially when they don’t have multiple years of trading.”

Positive climate for SME loans

The increase in funding comes at a time when UK Finance revealed in its latest Business Finance Review that demand for SME finance is returning. It revealed that $3.5 billion was lent to SMEs in Q4 2023. The first quarter that had not fallen since Q2 2022.

That trend was taken advantage of by iwoca as it broke its own records for loan amounts during the first quarter of 2024. It has already completed 900 loans across the UK and Germany, totalling £200 million in the first quarter.

It brought the amount it has lent to SMEs to £3 billion since it was founded. Is iwoca changing the way that SMEs look to finance their businesses? In its latest SME Expert Index, iwoca reports that 76% of brokers report that high street banks are reducing their appetite for funding SMEs. However, in line with the UK Finance report, 86% expect demand for finance to increase over the next six months. Are traditional finance organisations missing an opportunity?

The British Business Bank’s 2024 annual report on Small Business Finance Markets found that specialist and challenger lenders’ share of total gross lending. This reached a record high last year. It now accounts for 59% of the market.

Iwoca is an innovative lender providing loans directly through the technology platforms that SMEs use, such as Qonto, CountingUp, and LianLian Global. It also offers buy now, pay later integrations with QuickBooks WooCommerce and Xero.

Enterprise Times: What does this mean

While the larger banks may lose their market share of lending directly to SMEs, they are still involved in the process. With Barclays and Citibank both increasing the funds available for iwoca. Is this a play that ensures they no longer need to invest in the administration and risk of small business loans?

However, it is a wise choice in the long term. As it will enable challengers such as iwoca to build strength. At what point do these new firms become not only self-sufficient but also able to offer even larger sums to larger organisations. Ones which the traditional banks rely on?

This funding is a reflection of the success that iwoca has enjoyed over recent years. It comes at a time when the sector is expanding. And with its technology integrations in place for SMEs to take advantage, it could see the company growth explode. The firm already has 400 employees across the UK and Germany. Will 2024 see it expand to another European country?


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