Payments made easier for small firms

After a spectacular IPO, Worldpay now is into offering cash advances

Worldpay, the UK payments processing company, is breaking into the small business lending market in a move to provide thousands of customers with flexible loans.

The payments processor, which has entered the FTSE 100 less than two months after an initial public offering, has launched a financing scheme to offer its 300,000 small business customers cash advances. The new Worldpay Business Finance unit, created in partnership with Liberis, a provider of cash advances, will offer loans based on a company’s future credit and debit sales — with no finite time period for repayments.

The launch of the service comes shortly after Worldpay listed on the London Stock Exchange with a value of £6.3 billion in the UK’s biggest IPO in two years. Branching into the underserved sector diversifies Worldpay UK’s business, which focuses on the payment processing technology that underpins companies’ ability to accept card payments in-store and via online, mobile, mail and phone.

High-street banks retrenched from small business lending following the financial crisis, leaving a dearth of funding. The Bank of England last week extended its scheme to finance bank loans for small businesses using cheap government money by a further two years.

Dave Hobday, UK managing director at Worldpay, said: “We’ve been concerned that the lack of affordable funding available to Britain’s SMEs is stopping great businesses from growing and thriving.”

For companies seeking an unsecured cash advance, Worldpay’s business finance unit apply a “factor rate” to determine the total amount that will be paid back, with no fixed term — unlike traditional loans. Business owners can apply for a cash advance up to the equivalent of one month’s card takings.

Repayments

To make repayments, the borrowing companies preagree a percentage rate of its daily card transactions, so they pay when they are earning rather than come under pressure when business takes a dip. Rob Straathof, managing director at Liberis UK, said: “Our flexible payment system means repayments are relative to income and there are no hidden fees or charges.”

Hobday said: “It’s done on a daily basis so that it fluctuates with your business.”

Such flexibility will be useful for seasonal businesses, who are able to take longer repaying their advance if they enter a slower period.

Worldpay’s vast store of customer data can be used — with businesses’ consent — to share with Liberis in order to underwrite advances quickly. Funds can be provided within 24 hours after a business has signed an agreement contract, Hobday added.

Martin Purdy, an independent jeweller and a customer of Worldpay, believes cash advances are the best way to continue to grow his business. “I get offered beautiful pieces of pre-owned jewellery valued at a few pounds to many thousands almost on a daily basis so I need available cash,” he said. “I can’t afford to miss an opportunity. Sellers are paid immediately, but it can take weeks for the item to sell, so I need funding that suits my cash flow.”