Opinion Alternative Lending

Online Lending Post-Brexit: Why We Were Undeterred by the Referendum Vote

On November 3, with a click of a button, we launched  https://www.spotcap.co.uk, giving 5.4 million private sector businesses in the UK access to an online application for a credit line of up £150,000.

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Founded three years ago, Spotcap was created to help businesses that face difficulties in obtaining financing. While working at some of the leading financial service institutions in Europe we noticed that the SME sector was underserved. Healthy businesses consistently struggled with getting access to capital injections at critical times; there was clearly an unmet need in terms of short-term flexible financing.

We were fortunate enough for opportunity and demand to align and with the help of investors and a group of talented and hardworking individuals we launched in 2014.

Over the past few years we have put our knowledge and passion into building a business that assesses credit-worthiness using a wider set of data than traditional loan providers. Our credit risk algorithm has been developed in-house and we lend from our own balance-sheet. The service we offer, a flexible credit line that gives businesses the freedom to make a drawdown when needed, has been well-received. To date £50 million worth of loans have been issued to businesses in Australia, the Netherlands, Spain and the UK.

Our November UK launch was motivated by an appreciation of the country’s strong multi-sector SME economy. From professional service providers to retailers, wholesalers, and manufacturers, there are an estimated 5.4 million SMEs in the UK that account for 47 per cent of the country’s annual turnover. The credit lines and loans we provide are typically of interest to businesses looking for working capital to help them scale and grow. The average ticket size is £100K, on the higher end on what is available online, and is offered at competitive rates for a duration of 1.5 years.   

Having received our permanent FCA license we were ready to enter the UK during the second half of 2016, and then Brexit happened…

I’ll admit that at first, as a European who believes in the efficiency of a common market operating under standardized regulations, I was taken aback. However, we ultimately came to view the timing of the referendum vote not as something adverse, but as a strategic advantage. Once the initial Brexit upheaval was replaced with a “keep calm and carry on” attitude we launched and started to build our loan book with sector-specific insights, allowing us to minimize exposure to high-risk businesses. 

Although it’s too soon to discuss the long-term impact of the UK’s decision to leave the European Union, the most immediate implication is obvious – a state of uncertainty now exists. Greater uncertainty in economic conditions typically hits SMEs harder as they are perceived to be higher risk. At the same time the need for financing to enable businesses to innovate, remain competitive and grow increases, which is why access to capital will be crucial for UK businesses to adjust to changing post Brexit conditions.

The government’s Autumn Statement pledged £400 million for the British Business Bank to invest into venture capital funds. On top of this, Margot James, minister for small business, has announced additional funds dedicated to the North and the Midlands to be released next year. These initiatives set a clear tone in terms of the government’s commitment to the SME sector. It plays an important role but support from the wider financial services ecosystem is also key. In 2017 UK SMEs will need safety and security, speed and transparency and increased flexibility to grow. We look forward to working with traditional and alternative finance providers, technology platforms, policymakers, and regulators to promote inclusion, stability and economic opportunity.

For all of us, may 2017 be the best year yet!

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