Most online businesses rely on being able to access credit when they need it. Whether it’s needed to hire new staff, fund the expansion of their product line or launch a new marketing campaign, credit is the lifeblood of eCommerce.
However, since the financial crash in 2008, conventional banks have tightened up their lending processes, making it harder for smaller online businesses to borrow. At the same time, established financial institutions have struggled to embrace the online sector, with its unique quirks.
The result has been the appearance of new forms of lending that are specifically tailored to online businesses. These include services offered by online payments giant PayPal, who have also been joined by peer to peer lending platforms in recent years. You can also read our Paypal Working Capital review. Companies like Bitbond and Iwoca have emerged, targeting clients who need to boost their working capital and haven’t been able to secure it through normal channels. This is why we want to provide you with this Iwoca review.
If you are seeking working capital for an online business, choosing between the available options can be tough, but often it’s worth investigating. If you need cash to expand, bridge liquidity gaps or take advantage of one-time market openings, accessing credit can be a life saver.
This Iwoca review will look at the services offered by Iwoca and Bitbond, two of the most dynamic firms in the sector. They might not be for you, but it is well worth knowing what they have to offer. Let’s get this Iwoca review up and running!
What Do Iwoca and Bitbond do Anyway?
Bitbond and Iwoca both provide credit to online companies, but they do so in very different ways.
Iwoca review ☑
Iwoca was founded in London in 2011 by Christoph Rieche and James Dear as an automated lending platform for online small businesses (the name refers to “Instant Working Capital”).
Iwoca brings together sources of information about every borrower’s online credit rating and uses that data to carry out instant credit assessments. They do so by comparing data from borrowers’ Amazon, eBay, business bank accounts and PayPal accounts and, so far Iwoca have lent out over £70 million to online customers.
Iwoca generally have a maximum loan amount of £100,000, repayable over 12 months at a typical interest rate of 3 percent. Usually, the rule is that Iwoca will lend up to one month’s revenue, or a sum of £10,000 for start-ups. The firm claims to be able to assess credit ratings and deposit funds within hours of the user logging on, and repayment is flexible. You can pay your loan off in one go or keep to the initial schedule. Interest is only charged while you have the funds in your account.
Bitbond review ☑
Bitbond is quite different. As the name suggests, Bitbond uses Bitcoins as the basis for their lending activities. Bitbond runs a peer-to-peer lending operation, in which lenders upload their capital to the company’s website and can then decide which loans they wish fund.
Borrowers need to set up an account and upload details about their loan to the Bitbond marketplace. If enough lenders subscribe enough capital, their loan becomes funded, and the money is deposited in their account. Interest rates are calculated by Bitbond based upon the credit worthiness of the borrower and the length of the loan. Because Bitbond uses Bitcoins in their lending, they can operate across the globe, making their services useful for businesses that operate across borders.
Both of these lending platforms are radically different to conventional credit cards and bank loans. In a time of tight credit, they provide access to pools of capital that would otherwise be off limits.
Iwoca Review – the Services they Provide
Iwoca market themselves as a “flexible credit facility for your small business”, helping to supplement the cash flow of online sellers.
- Iwoca has lent to a range of different businesses, including hotels, food retailers and restaurants, but only lend to UK based firms. Start-ups are catered for, but only up to a maximum loan of £10,000 (if the annual revenue of the company has reached that level).
- Signing up takes place online, and a loan can theoretically be deposited in a couple of hours. An Iwoca account manager has to assess each application before loans are approved, and will then make an offer to the client based upon their needs. This could be from £1,000 to £100,000, but usually equates to one month’s revenue (maximum).
- Interest rates vary between 2 percent and 6 percent per month, and that is the only charge that Iwoca levies. This works out at an APR of between 20 and 60 percent. Interest is charge only for the time that borrowers have the funds in their account.
- After one third has been repaid, clients can top up their loan, and all offers are renewed when the loan term has ended or the sum has been repaid.
- Prospective borrowers who are denied finance by Iwoca can reapply regularly and their account manager will reassess them on request.
Iwoca has strong customer service, with a large customer base and a 9.6 TrustPilot rating. Customers on Trustpilot have highlighted the speed of accessing finance and helpful customer service, but also the relatively high cost of borrowing. Many businesses have commented that Iwoca also offered help at a time when conventional banks had become stricter with their lending.
How Iwoca Differs From Bitbond
Both Bitbond and Iwoca offer hassle free finance for online small businesses, but they do so in different ways:
- Borrow around the world, whenever you need to – Unlike Iwoca, Bitbond is a global business. Borrowers can log on and borrow in currencies all over the world and they don’t have to be UK-based.
- Flexible terms – Bitbond offers a more flexible loan schedule for borrowers, with terms ranging from 6 weeks to 5 years. This can help small businesses to access very short term credit or plan for long-term expansion.
- Different types of loan – Bitbond offers amortizing loans over a fixed period, while Iwoca specialise in offering credit lines to businesses, which can push up their interest rates.
- Easier access to credit – Iwoca only lends to firms with an annual revenue of £10,000 or more. By contrast, Bitbond requires that firms have been trading for 1 year on one of the major eCommerce platforms.
- Efficient transactions – the beauty of BitCoin is that it lowers transaction costs and can operate across borders. Processing payments and loans can occur almost instantly and zip across borders without the need for currency exchange. This lowers the cost of borrowing as well.
- Low fees for borrowers – when a loan is funded on the Bitbond platform, all borrowers need to pay a small 1-3 percent origination fee. Bitbond’s origination fee is the lowest among all peer to peer lenders.
- Risk based interest pricing – Bitbond sets the interest rates for all loans on their platform, not auctions or borrowers when they apply. This is carried out via a risk assessment based on different categories of borrower. Bitbond carry out checks on potential borrowers, which is one way that they keep their fees and interest rates low. But these checks are not a burden, and are looser than those imposed by Iwoca.
Which Service is Right for Your Firm?
As noted above, both Bitbond and Iwoca serve online businesses that other credit sources overlook, so if you run an eCommerce firm and are struggling to fund your working capital, there is a good chance they could help.
Iwoca has created a reputation for supporting eBay sellers and small businesses in the UK, and their loans are fairly accessible. However, they do carry out tight credit checks before disbursing any loans.
Bitbond offer a lot of the features provided by Iwoca, within the peer-to-peer Bitcoin market, which provides some extra advantages.
- Using Bitcoins as the basis for lending means that Bitbond’s fees are rock bottom.
- Effective APRs are also usually between 9 and 35 percent, lower than equivalent loans with Iwoca.
- Bitbond also offer efficient cross-border transactions. If you operate in different countries, it might help to access capital where you operate. That way, you can direct your capital where it is needed and save on transaction costs.
- Bitbond is totally independent of the banking system. Although it has an innovative lending model, Iwoca relies on conventional finance to fund its operations. Bitbond doesn’t rely on too-big-to-fail banks, which makes it more resilient in the future.
- Bitbond has a strong relationship with eBay, offering low interest eBay loans (as low as 1 percent per month) and loans of up to $10,000 for eBay sellers across the world.
Finally – Iwoca review
Secure working capital for your online business. If you need credit for any small business both Bitbond and Iwoca, are strong options. This particularly applies to eBay sellers, as both Iwoca and Bitbond specialise in catering for that sector of the eCommerce market.
Whether you need credit for your eBay store or you are starting up a Shopify based firm, both Iwoca and Bitbond have something to offer. But if you want professionally managed, competitively priced credit the Bitcoin based lender seems to have the edge.
I hope you have found this Iwoca review helpful ☕