China-based Alibaba.com, an online platform for wholesalers, has established strategic partnerships with two UK-based alternative lenders, ezbob and iwoca.
The arrangement is designed to provide UK small- and medium-sized businesses with access to trade financing more easily when they purchase goods from China-based suppliers on Alibaba.com, the firms announced in a statement.
The small business financing deals mark a first for Alibaba.com in Europe and will be enabled through a product called Alibaba.com e-Credit Line. Last month, the firm signed a similar agreement with Lending Club to provide US-based businesses with financing.
The partnerships offer two tiers of lending. Through iwoca, UK-based businesses can apply online to secure financing of up to £50,000 for up to 6 months. Through ezbob, they can apply to borrow amounts from £50,000 to £120,000 for up to 15 months.
One of the most notable aspects of the agreement is that the ezbob loans linked to trade through Alibaba.com will be guaranteed by the European Union, as they qualify for risk sharing under the EU’s COSME programme, a spokeswoman for ezbob explained to PDI.
“We want to make financing as easy as possible for the millions of British companies that do business through Alibaba.com,” Wei Duan, Alibaba.com’s European marketing and business development director, said in a statement.
“Small business have been failed by the banks due to lack of available financing,” Christoph Rieche, chief executive of iwoca, added. “This deal gives small businesses the muscle they need to quickly finance deals and trade in the global market. The partnership with Alibaba.com highlights the dramatic growth in alternative forms of lending and the economic shift away from established bank lenders. We expect to finance over £100m worth of deals over the next 12 months,” he continued.
Interest rates at iwoca for Alibaba.com loans will be set between 1.5 to 2 percent per month levied on the outstanding balance of the credit line. Credit lines will be approved within hours of application. They are free from administrative or arrangement fees, as well as early prepayment fees, according to the statement. The deal will also give borrowers access to commission-free currency exchange. Interest rates on ezbob loans are from 0.75 percent per month for Alibaba.com customers.
Ezbob is owned by Orange Money, one of the first online SME lenders to be an approved financial intermediary for the EU and the European Investment Fund (EIF). It is also backed by Angel CoFund, supported with investment from the British Business Bank.
Russell Gould, chief operating officer at ezbob, commented: “We welcome the opportunity to help small businesses to negotiate with suppliers from a position of strength with readily available funds.”
Alibaba.com is part of the Alibaba Group which was founded in 1999 by 18 people led by current executive chairman Jack Ma. It has become a leading global e-commerce giant since it launched its first website to help Chinese exporters, manufacturers and entrepreneurs to sell internationally. In September 2014, it listed on the New York Stock Exchange. The listing ranked as the largest initial public offering ever giving the company a valuation of $25 billion.