The Swallow Sidecar Company was founded on 4 September 1922 by two friends, William Walmsley (b. 1892) and William Lyons (b. 1901). Both families lived in the same street in Blackpool, England. Walmsley had previously been making sidecars and bolting them onto reconditioned motorcycles. Lyons had served his apprenticeship at Crossley Motors in Manchester before moving to Brown and Mallalieu as a junior salesman.

Lyons, having recognised the commercial potential for these sidecars, joined Walmsley and together they obtained premises in Blackpool with the assistance of a £1,000 overdraft. With a small team of employees they were able to begin commercial production of the motorcycle sidecars.

The company diversified in 1926, changing its name to the Swallow Sidecar and Coachbuilding Company and moved into the car coachwork business. The first car that Lyons and Walmsley worked on was the Austin 7, a popular and inexpensive vehicle. Lyons had persuaded a dealer in Bolton, Lancashire to supply him with an Austin 7 chassis and commissioned Cyril Holland, a coachbuilder from the Midlands, to create a distinctive, open tourer body. The result was the 1927 Austin Seven Swallow.

Priced at only £175, the Swallow, with its brightly coloured two-tone bodywork and a style that imitated the more expensive cars of the time, proved popular at a time of financial hardship for many. Soon after, a saloon version was produced: the Austin Seven Swallow Saloon.

In 1927 the "Sidecar" was dropped from the name, and it became the Swallow Coachbuilding Company.

The increasing demand for Swallows made it necessary to move the company closer to the heart of the British car industry and so, in 1928, they moved to a part disused First World War munitions factory at Holbrook Lane, Coventry. Business continued to grow and in 1929 the company was sufficiently confident to go to the expense of taking a stand at the London Motor Show.