- Small businesses often face lags between when they need money and when they receive the money they are owed. Industry-standard terms can delay payment for a small business by 30, 45, and even 60 days, potentially requiring it to borrow more.
- SoftBank-backed Kabbage, which offers small business loans, is now rolling out customized loans ranging from three to 45 days.
- These short-term loans will be available to customers using the Kabbage Payments platform, so Kabbage can make credit decisions based on a business’ daily earnings.
- Kabbage’s last fundraiser was a $250 million Series F from SoftBank in 2017, pushing its valuation above $1.2 billion. He also raised hundreds of millions in debt financing to fund its lending platform.
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For small businesses, money moves slowly.
There are industry-standard time frames between providing goods and services and getting paid. Invoices are paid 30, 45, or even 60 days later, which can leave small businesses cash-strapped and causing them to borrow more over longer periods.
Kabbage, the SoftBank-backed Atlanta-based small business lender, offers loans ranging from six to 18 months.
And now it’s offering customized short-term loans, which will range from three to 45 days.
These personalized loan products will be available to customers who have a line of credit with Kabbage and use the Kabbage Payments platform, which the startup launched last year.
Kabbage adds these short-term loans largely through customer feedback, Kabbage co-founder and president Kathryn Petralia told Business Insider.
“What we heard from them and saw in the data we were getting from our clients was that they often needed capital at very short notice, and they knew exactly how long they needed it,” said Petralia.
“The products we currently had couldn’t serve that.”
There is a connection between payments and lending, which several payment and lending companies like Stripe, Square, and FundBox have targeted.
The idea is that with insight into a company’s ongoing payments, shorter-term loans can be issued and repaid from daily income.
Kabbage’s short-term custom loans can be repaid in full at the end of the term, or can be repaid over time based on revenue earned on the Kabbage Payments platform.
“Clients who accept payments through us actually present a perfect repayment vehicle for this type of loan,” Petralia said.
Using payment data, Kabbage can make short-term credit decisions.
Small businesses often have a specific use for a short-term loan, Petralia said.
“That’s the value of this particular product is that customers know exactly what they need and they know when they will have revenue to meet their needs,” Petralia said.
Kabbage Payments was launched with the goal of providing small businesses with an easier way to manage their cash flow. The platform includes digital invoice tracking, a dashboard to manage cash flow and loans, and the ability to send links to get paid electronically.
The payment platform was initially rolled out for existing Kabbage customers. But now any small business can apply to use it.
Kabbage’s last fundraiser was a $250 million Series F from SoftBank in 2017, pushing its valuation above $1.2 billion. He also raised hundreds of millions in debt financing to fund its lending platform.
See also: Fintech has become a buzzword that often means nothing. We asked the leaders of 21 startups like Brex, Kabbage and N26 what really matters.