The lender, which set up in April 2020, is one of a new wave of small business funders base lending decisions based how much you are selling each month. In recent months Clearbanc and eBay have both launched their own versions of what’s known as merchant cash advance in Britain, while PayPal has been offering it for some time.
By tying its technology to your bank data, accounting software or social media ad accounts, a lender has a real-time view of your monthly income. This means repayments fluctuate as a percentage of income, rather than being a fixed amount each month like a bank.
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Although well-established in America and in Sweden, where the concept originated, merchant cash advances are still a relatively new concept in Britain.
Hasam Silva, managing director of Forward Advances, said: “In the US merchant cash advance or revenue-based financing is a well-understood product but, in the UK, less so. Half of all founders I spoke to last year hadn’t even heard of the concept, which was a challenge.”
How Forward Advances works
To date, Forward Advances has lent money to around 50 small businesses with an average loan being £50,000.
Forward Advances can lend anything between £10,000 and £1m with the average repayment term between five or six months.
The lender charges a fixed fee of 6 per cent for its service, with a revenue corridor of anything between 10 per cent and 30 per cent of monthly income.
Its cash so far has come from parent company Forward Partners but it is close to signing a debt facility with an institutional lender, so that 80 per cent of its capacity going forward will come through institutional debt.
As part of the offer, Forward Advances offers a free one-on-one session with a business mentor, up to three hours of advice, helping customers plan to grow their business and scale their e-commerce company.
The next era of the internet he says will be about providing much more intelligent, curating products for their target customers or a brand concentrating on doing a specific product really well, such as recent Start-Up Series winner – and Forward Advances customer – Bedfolk.