European small business lender iwoca says it has raised $243 million in new funding.
The financing, announced late Monday (Oct. 16), follows the $152 million the London-based company raised in January to meet a rising demand for working capital among small- to medium-sized businesses (SMBs).
“We started iwoca after the financial crisis to offer [SMBs] the support that was so badly needed during uncertain times,” Christoph Rieche, iwoca CEO and co-founder, said in a news release provided to PYMNTS.
“Now, over 10 years later, we are fully tested and have proven that we can be there for [SMBs] when they need us the most. With this new funding, we’re in an even better position to help small businesses in the U.K. and Germany at a time of economic uncertainty,” he added.
The release noted that a majority of brokers say mainstream lenders’ attitudes toward SMB lenders are cooling, at the same time the demand for finance among these smaller businesses is rising.
According to iwoca, the company has lent more than $3 billion since 2012 and is on track to end 2023 doubling the number of SMB loans it has funded in two years. iwoca said its top-funded sectors include the construction, retail, manufacturing and food production sectors.
The troubles facing SMBs in iwoca’s core markets aren’t just confined to the U.K. and Germany.
PYMNTS Intelligence shows that 60% of smaller firms are denied funding through traditional channels, that is, loans issued through financial institutions (FIs). But where iwoca sees loan demand rising, it may be waning among U.S.-based SMBs.
The Kansas City Fed reported recently that small business commercial and industrial lending continued to dip in the second quarter, falling 16.8% from the same period in 2022 and 1.2% from the last quarter.
Banks, said the Fed, “reported declining loan demand for the fifth consecutive quarter, with the largest percentage of respondents reporting a decrease since the survey began.”
The latest lending data indicates that new commercial and industrial credit lines dropped more than 13.6%. The latest readings also show that approval rates at large FIs were at 48% in the most recent quarter, down from a peak of around 70% during the pandemic.
Still, SMBs need funding. Near the end of the second quarter, PYMNTS Intelligence found that nearly half of Main Street SMBs plan in the year ahead to either increase the amount of credit they access or start tapping credit if they’d not yet done so.
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