Online retailer eBay is launching a new money-lending service for business sellers on its platform after finding many struggled to access Government loan schemes during the Covid-19 pandemic.
Bosses have teamed up with fintech firm YouLend and will allow 300,000 small and medium-sized firms who use eBay to access loans of between £500 and £1 million.
The loans can be approved within 24 hours and will then be paid back based on a percentage of revenues from each individual applicant, rather than with traditional fixed monthly payments.
Chief executive Murray Lambell explained: “Our job in the marketplace is to look at where there’s friction in the market and where we can connect the buyer and the seller.
“It’s been apparent for online businesses that they haven’t had access to the capital that they’ve needed. It’s been exacerbated during Covid but it’s been there previously.”
He told the PA news agency many had struggled to access funds, including the Government’s bounceback loan scheme, due to many sellers acting as sole traders.
The boss added that traditional high street lenders had been overwhelmed with loan applications from businesses that have struggled during Covid-19.
Mr Lambell said: “It’s slightly perverse and goes to the economic debate of where do you place your bets. The knock-on effect of Covid (with banks lending to struggling firms) is some businesses haven’t been able to grow as fast as they’d hoped to.”
A new survey by eBay found that 40% of small businesses were denied a loan from a bank, while 31% have been turned down for a Government-backed loan during the pandemic.
As a result, nearly one in three small firms said they risked going bust in less than a month due to inadequate access to funding.
The eBay chief explained: “Traditional routes like banks are more sceptical to businesses that are online or in the marketplace model.
“In Covid it’s been exaggerated because those loans don’t target higher growth online businesses because banks don’t have the capacity to process them.”
The new loan scheme will use eBay’s own internal data on the sellers who use its site to determine the amounts, including sales data, page views and a user’s rating.
The company did not disclose what the interest rates on the loans would be, other than to say they would be “competitive”.
Mr Lambell added: “I’m not here to make money out of financial services. My interest is to make sure the sellers on the platform win. When my business grows, their business grows.”
He also said he would expect to see traditional lenders following suit with more tailored approaches to lending, especially on sites such as eBay where marketplace sellers can see peaks and troughs in sales during the year.
The boss said: “Open banking has opened up a new realm of possibilities and we think it’s incumbent on us to make sure we use those opportunities to best serve our customers.
“We are open to new opportunities and we hope that others will explore new ideas too.”