Based in London, EZBob offers loans online for small- and medium-sized businesses. What makes it different from other online lenders?
Europe-focused online lender EZBob Ltd. announced on Friday that they succeeded in raising £20 million ($28.81 million) to close their Series C round. The funding was led by new investor Leumi Partners and existing backer Oaktree Capital Management LP.
Based in London, EZBob offers loans online for small- and medium-sized businesses under their EZBob and Everline brands. Co-founded in 2011 by CEO Tomer Guriel and Business Development head Sharone Perlstein, the company claims to have lent out over £100 million in funding to more than 8,500 recipients.
The company offers their clients a faster way to get approved for loans through their online platform, stating that they can register new users in 10 minutes and complete transfers of funds to their accounts in just one hour.
Over the course of the past year, EZBob has had some significant wins, including the signing of a partnership with Alibaba, and their £40 million loan agreement with the European Investment Fund (EIF).
The growth of online lenders
EZBob joins the burst of online lending platforms that have sprouted up to increase individuals’ and their businesses’ access cash.
Companies like Prosper focus on straightforward P2P loans for lining up money for individuals, while others such as Lending Club include funds for small businesses as well.
Another form of financing for small and medium businesses called factoring has started to gain traction, wherein the companies basically advance their clients cash based on their upcoming invoices. This cadre has companies like Fundbox, BlueVine, and Behalf.
All of these companies aim to fill a space where local brick and mortar banks used to hold sway, with the goal of making more funds available to a wider base of clients. One of their biggest selling points is the speed at which users can apply for the loan, run through the necessary credit checks, and receive their proposed rate.
This increased speed over the banks is owed in part to authentication services like AU10TIX, which partnered with Everline and EZBob back in November. Financial institutions are required by international statutes to confirm the identity of their clients as part of an effort to cut down on money laundering for criminals and terrorists. AU10TIX’s advanced algorithm allows their clients, like the online lenders, to provide much faster and accurate service, thereby cutting down on the wait time.
EZBob takes advantage of the digital infrastructure to speed up the process, tapping into an applicant’s cloud-based accounting software and other telling collections of data to help them determine if they can offer them the cash.
What is the catch of these platforms?
Beyond the ease and speed of service offered by these services, they are also appealing to folks whose credit score would otherwise keep them from getting a loan from a bank. In general, banks offer considerably lower rates than these platforms but are much more discerning regarding to whom they give money, and can ask for collateral to back up the loan.
It is interesting to note that these companies that offer an alternative to the banks are now receiving investment from them as well.
“This is Leumi’s first major investment in FinTech outside of Israel,” Chairman of Leumi Partners and Leumi Group Deputy CEO Prof. Danny Tsiddon said in his statement to the press, adding that, “Business e-lending is rapidly growing around the world and is attracting global banks, who see its potential and allocate more and more resources towards it. It is only natural that a bank which specializes in Israeli high-tech and spearheads innovation has chosen to invest in this leading Fintech startup.”
At first glance it appears off kilter that the banks, whose business model could be disrupted by the entrance of new players into the industry, would take such an interest in getting on their side. The probable reasons for their enthusiasm are that these lenders can give out loans to riskier clients that the banks would not (and should not) give money to, and secondly their recognition that this model will have a significant presence moving forward and they do not want to miss the boat.
While these smaller operations that exclude the direct involvement of traditional institutions – brushing up with the dispersed and disruptive “sharing economy” – are likely to keep picking up speed, groups like LeumiTech will be watching closely.
As one of the leaders in Israel’s Fintech scene and a major bank, Leumi is well positioned here to get its foot in the door with a rapidly growing company that can help them expand their own offering through other avenues, reaching more lending opportunities.
On the client side, there is still reason to be skeptical of this easy access to funding. While every business knows the need to obtain operating funds that can keep their business afloat, they should be careful about jumping at the chance for easy money, just because it is available.