Since the financial crisis of 2008, it’s become much harder for small businesses to find funding and loans. Although banks are now beginning to lend money more readily once again, it’s arguably still not as easy to fund business expansion and boost cash flow than it once was.
This reality was recently brought into sharp focus by a 2014 European Commission survey that found a third of small businesses were unable to access the bank finance they needed to fund expansion.
Thankfully, innovative new ways to borrow money have appeared to fill this crucial gap. These include peer-to-peer (P2P) loans, and crowd funded investments. Now, another pioneering way to borrow money has arrived, in the form of iZettle Advance.
iZettle Advance: Fast, easy loans
iZettle Advance is an off-shoot of iZettle’s payment processing business. It aims to provide SMEs with quick and easy funding when they need it, without complicated application procedures and the need for the businesses to put up collateral.
Here’s how it works: Businesses who use iZettle to process their credit and debit card transactions can qualify to take out a loan with iZettle. There’s not even a formal application. Instead, iZettle uses the data readily made available by the history of sales and transactions being put through their system.
Read the full iZettle review: Advanced contactless card reader and free basic Lite reader
This gives iZettle a good idea of how solvent a company is, and how wise it would be to lend to them. Companies who are offered the chance to take out the loan can apply for a specific amount, and specify the period of time over which they want to take out the funding.
Repaying an iZettle loan through future income
Repaying an iZettle loan is different too. Instead of signing up to a fixed repayment plan, as a company would with a traditional bank loan, repayments are taken from future transactions put through the iZettle payment system.
This is all agreed as a percentage of income, making repayment extremely flexible for businesses with peaks and troughs in their income (and this, in reality, applies to most businesses). With a traditional loan, the company still needs to find the same monthly repayment during a quiet patch – with iZettle, repayments are restricted to the same percentage of income, and will then increase proportionally once trade picks up. For many small firms, this could prove a far more manageable way to repay a loan.
Another difference is this iZettle charge a fixed fee for the use of the funding, rather than working to a traditional interest-based model.
How to get an iZettle loan
iZettle Advance hasn’t yet been formally launched in the UK, but is expected to be rolled-out from 2016. To begin with, you will need to sign-up for iZettle’s services if you are not already a customer. The cheapest way is to register for the free Lite reader, though the state-of-the-art Pro Contactless is an even better bet at £59 (register here for the discount), down from the already affordable regular price of £79 ex VAT.
As loan offers will be based on your past history with iZettle, you’ll likely need to build a track record of sales before a loan offer is forthcoming, so it would make sound sense to start using iZettle for your card transactions now so you can start to build a stable picture of your sales.