Forward Advances, the provider of cash advances to merchants, aims to provide Â£ 250million in cash for small e-commerce businesses by 2023.
The Lender, which was established in April 2020, is part of a new wave of basic lending decisions from small business lenders based on how much you sell each month. In recent months, Clearbanc and eBay have both launched their own versions of what’s known as the merchant cash advance in Britain, while PayPal has been offering it for some time.
By pairing their technology with your banking data, accounting software, or social media ad accounts, a lender has a real-time view of your monthly income. This means that repayments fluctuate as a percentage of income, rather than being a fixed amount each month like a bank.
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Although well established in America and Sweden, where the concept originated, cash advances to merchants are still a relatively new concept in Britain.
Hasam Silva, Managing Director of Forward Advances, said: âIn the US, merchant cash advance or revenue-based financing is a well understood product, but less so in the UK. Half of all the founders I spoke to last year hadn’t even heard of the concept, which was a challenge.
Operation of term advances
To date, Forward Advances has loaned money to around 50 small businesses with an average loan of Â£ 50,000.
One of the benefits of using open banking technology is that lending decisions can be made within days.
Term loans can lend anywhere from Â£ 10,000 to Â£ 1million with an average repayment term of five to six months.
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The lender charges a flat fee of 6 percent for its service, with an income corridor of between 10 percent and 30 percent of monthly income.
To qualify, a small business must have at least six months of sales data and a monthly income of over Â£ 10,000.
While Forward Advances, which is an offshoot of the Forward Capital seed venture capital fund, can lend to any industry, it specializes in e-commerce, marketplaces, and software as a service ( SaaS) B2C.
So far, its liquidity has come from parent company Forward Partners, but it is close to signing a credit facility with an institutional lender, so 80% of its future capacity will come from institutional debt.
To date, the 50 small businesses that have withdrawn money from Forward Advances have split the money equally between digital marketing and buying stocks.
Silva points out that businesses that only spend on digital marketing and don’t have the inventory to make sales aren’t serving the customer. Vice versa and the stock is on your unsold shelves.
As part of the offer, Forward Advances offers a free one-on-one session with a business mentor, up to three hours of counseling, helping clients plan for their business growth and grow their e-commerce business.
Silva said, âWe can provide assistance even if we are not doing the day-to-day execution. In addition, we can put our clients in touch with experts in paid advertising on social networks.
Over time, Forward Advances would like to have its own in-house social media team that could help small businesses navigate the increasingly complex world of social media campaigns.
Silva said, âThe value we add makes it more suitable and personalized for e-commerce than someone like PayPal. “
Silva ignores any discussion of Main Street’s death – all that has happened is Main Street has moved in line.
And he’s not fazed by e-commerce giants like Amazon, either.
According to him, the next internet age will be about delivering much smarter preservative products to their target customers or to a brand focused on making a specific product, like the recent winner of the Start-Up Series – and the client Forward Advances – Bedfolk.
Small businesses struggle to get credit from the payback loan program