One of the biggest challenges e-commerce businesses face is getting access to finance; it’s not uncommon for these businesses to wait up to 6 months for bank approval. Collateral requirements, non-tailored credit assessments and, lack of product cashflow fit leads to business frustrations.
Bloom says it is an ecommerce business lender with a business model designed to help solve this problem.
The company says it works with merchants to deliver a finance solution that is unique to their business.
Instead of fixed monthly installments, Bloom takes an agreed percentage of sales, ensuring that the payments are in direct alignment with the company cash flow, with no fees, collateral or penalties.
According to James Hickson, Bloom Founder and CEO, “I felt there was an opportunity to really build something different. By funding ecommerce revenue our customers can avoid a lengthy bank application process or, even worse, equity dilution. Our goal is to be the first-class provider of to ecommerce businesses finance wherever we operate” he said.
Hickson recently took Which-50 through the key dimensions that an e-commerce business needs in order to move into a new and more effective phase of lending.
The first of these is that the lending needs to be embedded. “[Embedded lending] means it has to be part of an existing process that gives you access to understanding the cash flow of the business and, just as importantly, ‘default on’ repayment,” says Hickson.
Bloom uses 700 data points of alternative data to underwrite and it measures the data in real-time. Where banks and traditional alternative lenders often review bank statements that are out of date almost as soon as they are published, Bloom’s digital platform is able to assess up-to-date marketing performance, sales and returns, customer sentiment, and bank account data as they change and update.
This broad scope of data allows the company to determine the performance of the merchant and their ability to repay. This is not only a useful model for the e-commerce provider but also for the merchant, as it prevents the likelihood of indebtedness.
“We can put a complete picture around your company using really smart alternative data sources”, he said.
“We understand what your sales are like, we understand what your returns are like, we understand if your customers are happy, we understand what you payout from your bank account, and then we can determine the best solution for your business.”
Hickson claims that its new model of lending is more secure and effective than traditional lending processes.
He told Which-50, “Lending money is easy, it’s a great business. Getting cash back can be hard.”
While discussing traditional methods Hickson describes what he calls the inefficiency of a standard repayment process:
“The traditional way of lending is to identify a good business, lend money, and monitor performance over the course of the term. If things go wrong, you’ll likely end up going through a legal collections process that in many markets might take years; maybe you’ll get twenty-five cents on the dollar. . We’re different, in addition to strong underwriting, our ‘default on’ collection process enables us to get repaid from revenue.,” he said.
By taking an agreed percentage of revenue sales before it becomes operating cash, Hickson says Bloom is able to “control the flow” and reduce the risk of lending.
“If we play this right, I think as the Buy Now Pay Later story cools off, people will think, ‘Well we’ve innovated for the consumer in the e-commerce journey, but now we really have to think about that guy that’s going to fund all the stock and give them a better experience and service, because right now no one is focused on their finance needs like ad spend and inventory.’ And that’s where we’re going to fill in and I think that’s going to drive a really exciting part of our growth.”