The launch is part of Mollie’s move to become a fully integrated business financing service, branching out from only offering payments. Therefore, through this new service, businesses in the Netherlands will soon be able to apply for a merchant cash advance of up to EUR 250,000 via Mollie.
Businesses eligible for the financing from Mollie must be based in Netherlands, have been actively using Mollie’s payment services for a minimum of three months, and have had a minimum transaction volume of EUR 500, per month for the last three months.
Because Mollie already has sales data on its customers, it can easily assess affordability and small and medium enterprises (SMEs) can request funding in just a few clicks with cash arriving on the same day. Repayments are then automatically taken as a portion of daily sales, plus a one-time fixed fee is charged.
Mollie requires a personal guarantee as an extra level of protection. Across the market, a personal guarantee is typically required for these types of unsecured financing.
The rise of fintech lending platforms is changing the provision of financial services worldwide. While SMEs have traditionally relied on banks for their financing needs, today SMEs can also obtain financing through Peer-to-Business (P2B) platforms, which are technology-enabled platforms that allow a direct match between borrowers and lenders.
Fintech lending is making small business finance and consumer loans more accessible in terms of convenience and speed. According to the World Bank, alternative lenders have been helping small businesses go through the COVID-19 crisis, providing a lifeline and supporting their recovery.
However, an in-depth study by the Harvard Business School has shown that consumers using fintech loans tend to sink further into debt and default more often than people with similar credit profiles borrowing from traditional banks. These findings contradict the fintechs’ supposed ability to use data and analytics to improve credit risk assessment.
According to the same study, fintech loans are twice as likely to be delinquent after 15 months than bank loans, as fintech borrowers only partially consolidate their debts.
A study by the European Central Bank shows that firms increase assets, employment, and sales following fintech lending. Firms that access fintech lending experience an 8.2% point increase in asset growth, a 5.1% point increase in employment growth, and a 5.8% point increase in sales growth.
The results also point to the fact that access to the fintech platform allows SMEs to further diversify their pool of lenders. Fintech loans allow firms to add new bank relationships and reduce their dependence on a single bank.
Therefore, fintech lending platforms may be beneficial to SMEs, but for reasons that are not necessarily the ones expected. According to the study, fintech platforms do not seem to serve young, untested firms with no prior access to the banking system. Thus, the benefits of fintech do not seem to lie in increased financial inclusion of small businesses. Fintech, however, does allow high-quality SMEs to finance their growth and, at the same time, diversify their lending relationships.
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