eBay has decided to get into the financial sector and will start offering loans to businesses that sell through its marketplace in the UK. The new financial services tool known as Capital for eBay Business Sellers (CEBS) was put up to compete with high street banks and its former subsidiary PayPal.
CEBS will offer financing products to support the 300,000 small and medium enterprises (SMEs) that sell through the platform to 29 million active monthly buyers. The new research released from eBay showed that a third of the UK’s 5.9 million small businesses will crumble down in less than a month due to inadequate access to financing.
Research showed that 40% of SMEs were denied a bank loan, while one in three has been turned down for a loan by the government. Around 44% said they have not accessed any COVID support in the past year.
Murray Lambell, general manager at eBay UK said the programme will protect jobs and help businesses to reinvest.
“Small businesses make up 99% of all UK businesses, yet they have been financially excluded from traditional lenders. They were let down by COVID support schemes that made serious under-investment, leaving many at risk of going under while others are prevented from reaching their full potential.”
Lambell said the new programme aims to “plug this gap” by giving small businesses immediate access to financing options.
With 300,000 UK small businesses trading on eBay, this proposition will help them reinvest, protect jobs, and succeed, even as the government’s support schemes dry up.
“This is a field ripe for innovation and there’s a lot of unmet demand for better service for online businesses,” Lambell told the Financial Times. “We think eBay is well-positioned to deal with this.”
CEBS offers loans to SMEs
CEBS will initially offer loans between £500 ($705.45) to £1million ($1.41 million) to the 300,000 SMEs through a partnership with online lender YouLend. These loans are then directly repaid from their sales.
Lambell said eBay is also working on further lending options that will be targeted at larger companies to be announced in the coming months.
“We can partner with companies that offer solutions, and what we can give them is unrivaled access to data and information which helps them get the best loans,” Lambell said.
Stan Weekes, founder of eBay business SW Trading, said: “Greater access to financing will significantly help us grow and bounce back after what has been a tough year for so many small businesses.”.
This programme will be closely watched by executives at mainstream banks, who have been worrying long enough about the potential impact of large tech companies could have on the sector. Although eBay is a small company in comparison to the giants such as Amazon and Apple, its market capitalization is about 50% higher than that of NatWest, which is the UK’s largest small business lender.
David Duffy, chief executive at FTSE 250 bank Virgin Money said: “payments and big tech firms invading the banking space” were a “much more relevant” concern than fintech start-ups. An executive at another high street bank said moving into lending was “a natural evolution” for companies such as eBay, which have extensive data and established relationships with small businesses, giving them a head start compared with start-up lenders.
Amazon has also operated a similar business that lends to companies that sell through its marketplace for a decade, however, the progress has stumbled in recent years.
eBay’s decision to move directly into financial services came after it cut off its ties with PayPal, which was spun out in 2015. PayPal continued to handle many of eBay’s payments processes until last year. eBay said that taking direct control of customers’ checkout journey was “strategically important”. Lambell said the change allows eBay and partners “full sight” over more customer and seller data, allowing them to make better lending decisions.
Keala Gaines, eBay’s head of global payments services said that the platform’s strategy regarding payments has been evolving over the years as the company has grown. eBay is now available in 100 countries and has 27 international sites.