Online auction site eBay offers an alternative to bank loans for its 300,000 UK small business sellers.
The first product of its offering will provide credit amounts between £500 and £1 million for sellers. It will work in conjunction with YouLend, which provides finance to users of ecommerce platforms and technology companies.
Further lending options, targeting larger companies will be worked on in following months.
The automated information of trading history and performance data of sellers will determine credit decisions. Being automated allows the offers to be made rapidly – the company share that nine out of ten borrowers would receive money the same day that an offer is accepted. Ecommerce sellers such as Amazon and Paypal already use this automated process by which data is held on sellers and used to make fast credit decisions.
Repayment terms are for borrowers to repay when sales income comes in, with the amount of repayment proportional to monthly sales income. What is more, there is no security or late payment fees.
eBay launched its Capital for eBay Business Sellers programme on 12 May 2021.
The auction site stated that this finance was to help avoid the lengthy application forms, years of trading history, high interest rates and high-risk payment structures which come when using a traditional lender for borrowing. With the recent covid pandemic too, this new service would help support small businesses and address any cash flow issues caused.
This innovative development can be seen a competitive move, putting it against high street banks and its former subsidiary Paypal. The ‘‘landmark’’ move is the groups most significant step yet into the financial services sector.
eBay UK general manager, Murray Lambell spoke that ‘’there’s a lot of unmet demand for better service for online businesses…we think eBay is well positioned to deal with this’’.