Chinese e-commerce giant Alibaba has struck a deal with two U.K. start-ups to provide money to small and medium British businesses. The surprising move is designed to help British companies buy supplies from sellers on the Chinese platform.
Alibaba.com hosts Chinese wholesalers selling supplies and products to business across the world. An SME can buy the inventory they need from China no matter where they are in the world – but some struggle to afford it.
To help businesses overcome this issue, Alibaba has partnered with U.K. alternative lenders ezbob and iwoca. They will provide short-term working capital to small and medium sized enterprises (SMEs) and the deal highlights Alibaba's attempts to make further inroads in the European market.
The partnership means that when a U.K. buyer wants to buy products through Alibaba.com, it can apply for a line of credit. If approved, the funding would be provided by iwoca and ezbob directly to the Alibaba supplier.
The U.K. is one of the most important markets for the New York-listed Alibaba and the partnership will give the company a stronger foothold among the country's businesses.
"Finance is one of the key issues that we find… SMEs are concerned about. That is why we think this is the key area where we can bring value to business," Wei Duan, Alibaba.com's European marketing and business development director, told CNBC.
Alibaba has struck a similar deal with LendingClub in the U.S., and Duan said the company is looking to form partnerships in other European countries, with talks "in the pipeline."
U.K. SMEs can apply for up to £50,000 for up to 6 months with iwoca. The monthly interest rate is 1.5 percent to 2 percent, CEO Christophe Rieche told CNBC, adding that he is aiming to lend £100 million in a year.
"There are hundreds of thousands of small business importing, with the majority importing from China. The target market is massive us," Rieche said in a phone interview.
Through ezbob, customers can borrow between £50,000 and £120,000 for up to 15 months. Its interest rate ranges between 0.75 percent and 2 percent a month.
The company's COO said there was a large market of British businesses buying through China which ezbob can help finance.
"Is there a market? Hell yeah, and I think with their convenience and simplicity of Alibaba it will help fuel that growth in the economy," Russell Gould, COO of ezbob, told CNBC by phone.