Kabbage, Using Real Time Data to provide loans for Online Businesses

In current market scenario where there is a cut-throat competition among the market, companies are bringing new schemes and technologies just to gain the slightest of advantage over their competitors. Joining the scheme of things is Kabbage Inc. The company recently announced the launch of its new application for iOS and Android devices that enables its users to quickly add funds to their respective bank accounts or PayPal accounts.

Kabbage was co-founded in 2009 by Rob Frohwein (CEO), Co-Founder & Chairman, Marc Gorlin and Kathryn Petralia (COO). The company has received a total funding of $53.7 Mn through investors such as BlueRun Ventures, David Bonderman, Mohr Davidow Ventures, Warren Stephens, UPS Strategic Enterprise Fund, Jim McKelvey, Thomvest Ventures and SV Angel. Kabbage was named a Red Herring 100 North America Winner (Recognizes top private companies) in May 2012.

Kabbage has advanced money to successful EBay merchants and sellers, and others who conduct business online, since 2011. Kabbage assesses the applicant’s riskiness by crunching his transaction history, social media interactions and user feedback. Financing is offered within minutes of a positive assessment.

The new mobile applications makes easy for mid-sized business owners to get access to capital. It takes customers just a minute to login their account, select the amount of cash required and send the funds at realtime to their Paypal Or Bank account.

This is a video showing how Kabbage's platform works:

Inorder to use their application customer needs to follow these steps:

  • User need to sign up and create an account in Kabbage which is free.

  • Then user need to select where he wants to sell.

  • The next step involves user payment service.

  • After the payment service the business and personal information is to be given.

  • Then the application will be submitted.

  • After submission of application the customer advance amount immediately determined.

What makes Kabbage tick is that it does not rely on rely completely on traditional credit models but rather uses real time data while deciding whether to advance capital to a seller. Kabbage offers advances in the amount ranging from $500 to $40,000. Depending on lenght of load and other factors, the company charges a 2% to 18% fee for loan.

Till date, Kabbage customers from 41 states have taken advances through this Application. The rapid adoption rate suggests the strong need for funding in small Businesses and the Kabbage says its platform seeks to fulfilling this need. Enabling access to funds from mobile devices is the next Logical Step in making it easier for small businesses to get instant access to capital said Kabbage CEO Rob Frohwein. Kabbage has provided 60,000 capital advances since its inception but it excepts that number to rise above 100,000 in 2013 alone.

Another company operating in the same field is OnDeck capital founded 2007. Its innovative technology platform helps small businesses with access capital. Ondeck Application allows businesses to work on the go. OnDeck offers business loans upto $100,000 based on the performance of the business ,rather than the personal credit history of the business owner. Through this model the company is opening the market to connect millions of small businessess with revenue under $ 3 Mn to instituitons that want to lend money.

LTP View: Kabbage application will create a win-win situation for both the small businesses and Kabbage. It will help businesses getting quick access to capital, which will encourage new small businesses to go for cabbage. OnDeck offers loans upto $100,000 which is higher than the $40,000 offered by Kabbage.