July 16, 2014
Despite the stabilization of debt markets
Below, we highlight three innovative firms that are lending to such businesses.
What makes Kabbage tick is that it does not rely completely on traditional credit models but rather uses real-time data while deciding whether to advance capital to a seller. Kabbage offers advances ranging from $500 to $40,000. Depending on the length of the loan and other factors, the company charges a 2% to 18% fee.
Customers from 41 states have taken advances through the Kabbage application. The rapid adoption rate suggests the strong need for funding
Kabbage was co-founded in 2009 by Robert Frohwein, co-founder and chairman, Marc Gorlin and Kathryn Petralia (COO). The company has received funding
Kabbage has advanced money
Kabbage’s new mobile application makes it easy for midsized-business owners to get access to capital. It takes customers just a minute to log in to their account, select the amount of cash required and send the funds in real time to their PayPal or bank account
To use the application, customers need to follow these steps:
o Sign up and create a Kabbage account, which is free.
o Select where they want to sell.
o Enter their payment-service details.
o Provide business and personal information.
The application is then submitted, after which the advance amount is determined immediately.
Another company operating in the same field is OnDeck Capital, founded in 2007. Its innovative technology platform helps small businesses gain access to capital. OnDeck’s application enables businesses to work on the go. OnDeck offers business loans up to $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 connecting millions of small businesses with revenue under $3 Mn to institutions that want to lend money
Fastpay, a technology-driven antibank, provides commercial loans against digital-advertising receivables or factoring.
Fastpay was founded in 2010. The company started out with an enterprise ABL (asset-based lending) product that leverages data to lend to media-focused SMBs. Since its launch, Fastpay has lent over $100 Mn in working capital gap financing to more than 100 publishers, ad-tech companies and other digital-media businesses. Fastpay has received funding
Some features of Fastpay’s platform:
The industry that Fastpay chose to start with is media, because that industry has three important qualities: scale, demand and opportunity. Regarding scale: Global advertising is a $495-Bn-dollar-a-year market
Here’s a bonus fourth one, though it doesn't really operate in the space of lending to businesses ...
CommonBond is based on a model of social lending. Student borrowers gain access to lower-cost, fixed-rate loans provided by investors, who earn a competitive financial
Founded in November 2011, CommonBond was the brainchild of David Klein and Michael Taormina, who were first-year students at the University of Pennsylvania's, Wharton School of Business. Fellow student Jessup Shean, who was in the final year of her dual JD-MBA degree, was their advisor. The main reason the company's founders came up with this idea was their frustration regarding the lack of affordable loan options to fund
After deciding to pilot their model at Wharton, CommonBond’s founders focused on fundraising during the summer of 2012. By November 2012, CommonBond had raised $3.5 Mn. It first lent money
There are two types of borrowers in this model: current students, including those seeking new loans, and graduates, including those paying off loans.
The money required for these categories of borrowers is being raised from alumni and a community of investors who realize the potential of students and recent graduates that other lending institutions do not recognize.