London fintech startup iwoca just got $20 million from German investors

Britain's fintech sector is booming right now and cash is now flowing into startups based here from all around the world.

The latest example is iwoca, an online small business credit provider that just raised $20 million (£12.8 million) from 2 German investors, including the venture capital arm of bank Commerzbank.

It's iwoca's second round of financing and takes the total it's raised to $31.5 million (£20 million). Sources we spoke to indicate that the latest raise values the 4-year-old startup in the hundreds of millions of dollars.

London-based iwoca is a part of a crop of super-hot startups looking to reinvent business finance in the UK. Other leading lights include peer-to-peer lender Funding Circle, invoice finance provider MarketInvoice, and small business lender Ebury.

iwoca extends credit facilities up to £150,000 ($234,000) to small businesses. It was founded by 2 ex-investment bankers - Goldman Sachs alum Christoph Rieche, now CEO, and James Dear, iwoca's CTO who was previously at Deutsche Bank.

Rieche is on a trade mission to Asia with Prime Minister David Cameron right now, but I jumped on the phone with the company's CFO Michael Elalouf to talk about today's raise.

"What's most interesting here is that this fundraising enables us to issue $150 million (£96 million) worth of loans across our geographies and enable 1000s of smell to grow thanks to our product," Elalouf told me.

iwoca operates across the UK, Spain, Poland, and Germany, and has thousands of customers, according to Elalouf. The number of loans made grew by 250% in the year to June.

Elalouf says: "We have a very clear pricing policy - we just charge interest, no fees. No underwriting fees, no retaining fees. This gives great flexibility for our customers and they appreciate that a lot."

iwoca's custom-built lending engine gives businesses a decision whether it will lend to them within the day, pulling in a tonne of data points to make the call.

Elalouf says: "We go beyond the traditional credit scoring and gather a wealth of other sources, such as banking data and industry-specific data. If you look at the eBay traders of this world, we gather data from them that would enable us to get a better credit view of our customers."

As well as lending more, Elalouf says the latest fundraising will let the company build additional products. iwoca is also considering expansion to new countries. Elalouf says: "Looking at our current exposure, we've got exposure to half of the GDP of Europe already. But we're looking at other markets - France is an interesting market, so is Ireland."