Uncapped Launches Income Based Loans For SMEs Online
Leverage is a balancing act for every growing business. Debt potentially provides crucial investment capital and could be the key to accelerated growth. But loans must also be repaid, and the cost of servicing loans can act as an anchor holding the business together – even jeopardizing its survival if performance falls short of expectations and it becomes difficult to sustain. refunds.
Enter Uncapped, which markets itself as the leading provider of income-based finance in Europe, with a new kind of debt capital. It offers loans between £ 10,000 and £ 2million with a flat fee of 6% of the amount borrowed and repayments that vary from month to month until the loan is paid off.
It is an unusual model. Unlike a conventional loan, where the borrower pays a fixed amount each month until all principal and interest charges have been repaid, Uncapped monthly repayments are tied to the borrower’s income. In the months when sales are higher, the company makes a larger repayment; when income decreases, reimbursement is reduced. This arrangement continues until the initial advance and the 6% charge have been reimbursed.
The big advantage of this model is that businesses don’t have to worry about slower-than-expected sales making it hard for them to finance the cost of monthly loan repayment. It’s the fear of being caught this way that leaves many companies reluctant to borrow, says Asher Ismail, who founded Uncapped with Piotr Pisarz, even when they know they need financing to explore business opportunities. growth.
“Entrepreneurs are turning their backs on growth because they can’t find the type of financing that’s right for them,” warns Ismail.
Uncapped loans do not require personal guarantees, credit checks or warrants. Instead, the lender’s data analysis software connects to the borrower’s own financial systems in order to analyze their sales performance – and likely future earnings – to make a lending decision.
“This is an idea born out of my own experience of starting and running a small business,” Ismail says. “I didn’t want to take financing from the banks because they all wanted personal guarantees, so I missed a series of growth opportunities.”
Uncapped Loans are for online businesses with at least £ 10,000 in monthly income and a business history of at least six months. The model is particularly well suited to businesses with a steady stream of revenue in areas such as software as a service, games or subscriptions, but could have broad appeal.
Ismail says the lender has already issued hundreds of loans – but expects to ramp up its loans significantly in the coming months. The business raised £ 10million in capital from funders such as Global Founders Capital, White Star Capital and Seedcamp last year.
The model has obvious attractions in the context of the Covid-19 pandemic, with many small businesses seeking funding to help them through a difficult negotiating period, but worried about their ability to repay.
“The new financial solution that we have created takes on even greater importance since the pandemic struck and the lockdown became essential,” Ismail says. “If e-commerce businesses are to be the economic saviors they already show they can be, revenue-based funding will be the fuel that powers them.”