Zip Business to close

The SME lender — owned by ASX-listed buy now, pay later (BNPL) company Zip Co Ltd — first launched into market in 2020 following the acquisition of Spotcap Australia and New Zealand.

Following the Spotcap acquisition and a rebrand in 2021, it began offering SMEs BNPL for checkout payments of up to $3,000 (Zip Business Trade) and a line of credit that provided SMEs with between $3,000–$150,000 (Zip Business Trade Plus).

In September last year, the lender closed these two trade products, as the group moved to focus on profitability. As such, only Zip Business Capital — its unsecured business loan product ranging from $10,000–$500,000 — continued to be offered as the remaining product under the Zip Business brand.

This morning (1 May), however, staff were informed that the Zip Business Capital product will also be mothballed. 

Zip’s chief executive ANZ, Cynthia Scott, confirmed to The Adviser that Zip had made “the difficult decision to start winding down” the SME lending operation, Zip Capital. 

It will be communicating the closure to existing Zip Capital customers in the coming days. 

“This decision is in line with our ongoing efforts to simplify our business and our strategy to reach cash group EBTDA [earnings before taxes, depreciation and amortisation] profitability during 1H FY2024,” she said.

Ms Scott added that the business was now working with impacted staff and exploring “redeployment opportunities” within the organisation.

“Zip would like to thank our dedicated, talented staff for all they have achieved as well as our partners and customers for their support of Zip Capital,” she said.

The closure comes following a slowdown in originations.

According to an ASX update last month, Zip Business had originated $13 million in the third quarter of the financial year 2023 (3Q23); down 40 per cent quarter on quarter and down 34 per cent year on year.

Its revenue was down 3 per cent to $3.8 million in the quarter, a 15 per cent drop year on year.

According to an ASX update last month, the originations in the period reflect “tightened risk settings, seasonability and a deterioration in the operating environment for small business in ANZ”.

However, its number of customers had grown to 1,400; up 3 per cent quarter on quarter and 26 per cent year on year.

Zip Business has a total facility of $60 million, which is due to reach maturation in March 2024. Around $33.4 million had been drawn as at 31 March 2023.

The BNPL group last year announced that it was pivoting its strategy from a focus on “global growth” to a focus on “sustainable growth” in its core markets (including the US and Australasia) and accelerating a path to profitability.

Zip co-founder, global CEO, and managing director, Larry Diamond, said last month that the group was on track to deliver up to 50 per cent core cash EBTDA improvement in the second half of this financial year versus the $33.2 million results for the first half.

At the time, the company was reportedly “well funded with sufficient available cash and liquidity”, plus the above inflows and reduction in rest-of-world cash burn, to support the company through to group cash profitability during 1H24.

[Related: Zip to wind down SME trade finance products]