Small and medium-sized enterprises (SMEs) have become the backbone of the US economy. There are more than 30 million SMEs that employ millions of people.
Unfortunately, SMEs do not obtain bank loans as easily as large firms do. They rely on friends, colleagues, and internal funds to continue crucial business operations. Kabbage is helping SMEs and individuals grow faster by lending money.
Kabbage has served numerous individuals and businesses for their financial needs. This post will provide comprehensive information on Kabbage’s business model. You will learn how this fintech firm is helping needy individuals and businesses.
What is Kabbage?
Kabbage is an Atlanta, Georgia-based financial technology and data company. This firm offers automated underwriting and financial support to SMEs and individual borrowers. Several other companies use the technology platform offered by Kabbage to provide financial services.
Kabbage is using algorithms to assess data gathered from bank accounts, real-time cash flow data, online reviews, and e-commerce transactions. This information helps the lender assess credit risks before approving unsecured loans. Kabbage’s loan approval process is much faster than other financial platforms. That’s why it has emerged as people’s favorite lender.
Kabbage takes just a few minutes to assess information once you provide the required data and documents. Its fully automated process help users save their time and get the loan approved if everything is fine.
If an SME is operating through Amazon, eBay, Intuit QuickBooks, UPS, Authorize.Net, or Stripe, its credit eligibility will be quite high. Kabbage can easily access and assess the required information of companies operating as affiliates. Therefore, it takes just a few minutes to approve loans.
Kabbage provides different products under different brand names. The Kabbage brand provides SME loans, the Kabbage platform is used for licensing, and the Karrot brand offers personal loans.
It is not a bank. Being a private lender, Kabbage does not provide money deposit solutions. It can lend up to $150000 to small and medium-sized businesses. This company relies on various financial institutions for its credit facility. Therefore, it is always ready to lend money and help businesses expand their service capabilities.
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Kabbage Inc. was founded by Rob Frohwein, Kathryn Petralia, and Marc Gorlin in 2009. They had established this fintech firm to help small businesses secure loans quickly. It started lending money online in 2011.
Since it was entertaining many clients across the USA, the company opened its San Francisco branch in 2012. It had also raised $30 million in Series C financing in the same year. This company started entertaining international clients from the UK in 2013.
Kabbage had introduced its mobile application in the UK to make it simpler for users to apply for loans. Clients admired this new approach because they could access funds through their mobile devices. This fintech firm had introduced Karrot in 2014 to provide personal loans. It was lending money to all small and medium-sized businesses from that year.
The Kabbage Platform was introduced in 2015. It was the year when Kabbage had collaborated with MasterCard to provide better services. That same year this fintech company had raised $135 million in venture capital. Its valuation had gone above $1 billion and thus it had gained the “Unicorn” status in 2015. It was a major achievement for a startup, which was founded just 6 years earlier!
Kabbage partnered with Alibaba.com in 2019 to introduce its “Pay Later” program. It was a move to offer clients financing support at the point of sale. The company’s valuation had gone over $1.2 billion and its funding access had also increased exponentially. Now, American Express owns this company and operates it across the globe.
Kabbage’s customer count has nearly doubled since it has introduced the Paycheck Protection Program. It entertains thousands of customers in the USA and across the globe. It claims that clients have accessed over $715 million in funding. More new clients are using services offered by this fintech firm to operate smoothly.
This company entertains three types of customers:
- Small and medium-sized enterprises
This fintech firm was launched to provide funds to small and medium-sized enterprises. Thus, the SMEs have become major clients for this company. It offers SME loans so that small businesses can have working capital.
This company lends money to SMEs that have been in business for at least one year. The yearly revenue of the company should be at least $50000 otherwise Kabbage will not provide the loan.
An SME can also secure funding if it has generated at least $4200 per month for the last three months. Businesses, which meet the money lending criteria and operate legally, get instant financial support from Kabbage.
Adult US citizens can apply for personal loans offered by Kabbage. This company requires the applicants to be at least 18 years old. The applicant must have at least $10000 pre-tax annual income.
This company uses bank account and other sources to verify the client’s information. If the applicant meets the required criteria, he/she will get the personal loan approved within a few minutes.
- Lending organizations
Several fintech companies are using the platform offered by Kabbage to offer SME loans. Sage, ING, Fleet Cards USA, UPS, Scotiabank, Kikka Capital, and Santander are a few of those firms where SMEs get financial help for their business.
Kabbage serves all customers seeking funding to grow their business. User-friendly terms and conditions draw thousands of new clients every year to this fintech firm and it helps them.
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How does Kabbage serve SMEs?
This company follows different methods to create values for different customers and meet their needs. It offers $2000 to $100000 loans to SMEs. Applying for this loan is quite easy and the borrower can access the money quickly once the loan is approved.
Kabbage does not charge for offering financial support to SMEs. Businesses pay only the amount of money they use and the lender does not charge for money that borrower has not spent.
Banks and traditional financial institutions often reject loan applications of businesses, which are new. Kabbage offers loans to those companies and helps them establish themselves as a prominent business in the targeted region.
SMBs need to share information, such as accounting records, e-commerce revenues, bank accounts, and shopping data to apply for the loan. This information is assessed to ensure the business is legit and the assessment is never made public.
If the applicant business qualifies for a credit line, it can get the required fund and withdraw it once a day. The borrower pays only for the amount of money it uses. Small businesses can also access funds through the point of the dale. They have to use the purchasing card linked to their Kabbage account. This Kabbage card allows borrowers to make transactions at any business which accepts Visa cards.
How does Kabbage serve individual borrowers?
This fintech firm offers $2000 to $35000 personal loans to individual borrowers. It assesses the borrower’s credit history and then issues loans. These personal loans can be approved pretty quickly like SME loans.
The borrower needs to share his/her personal information on the official Kabbage website. The client will get the Kabbage card to withdraw money whenever required. Borrowers pay only the amount of money they access. Thus, loan repayments become much easier for individuals.
How does Kabbage serve lending organizations?
Many lenders provide SME loans and they use Kabbage’s platform to assess the creditworthiness of applicants. It was not a common practice to lend money to small and medium-sized enterprises. The assessment process takes much longer and therefore lenders used to reject small businesses.
The Kabbage Platform makes the assessment process much faster. It offers information and technology required to automate the assessment process. Lenders use the technology and data to assess risks and improve their customer experience.
Kabbage has the potential to provide tailored solutions for the lending organization. This fintech company licenses the technology to traditional lenders so that they can provide loans to SMEs. All in all, Kabbage is making it simpler for SMEs to gain funds from all the available sources!
Lending organizations need to contact the firm via online form, phone, or email. Negotiations take place offline before licensing the technology and data. Thus, lending organizations get the required support from Kabbage to streamline their lending procedures. Lenders may need to wait a bit longer for approval, but the support they get is quite beneficial for their business model.
How does Kabbage make a profit?
Kabbage earns profit through all three products, which are SME loans, Kabbage Platform, and personal loans. This company has not made its detailed financials public. However, this company has made $100 million in revenues during 2019. The estimated annual revenue of this fintech firm is more than $46 million.
This company charges 1.5% to 12% rates on SME loans along with additional fees depending on the creditworthiness and special circumstances. It assesses the credit history of individual applicants and charges a 6.44% fixed-rate on personal loans.
Other fees this company charges include late fees, origination fees, and a fee on returned payments for the risk it takes while lending the money. Fees charged for using the Kabbage platform are not public. Every traditional lender may pay a different fee depending on the data and technology it uses.
Why do SMEs prefer Kabbage’s SME loans?
Kabbage is a non-traditional financial company that serves numerous SMEs, individual borrowers, and traditional lenders. It provides instant solutions whenever a small business requires working capital to improve its operations.
Kabbage offers loans much faster than traditional money lending institutions. That’s why SMEs prefer lending money from this fintech firm instead of waiting for several days to get a response from a bank.
- No funding conflicts!
It is better to borrow from Kabbage than ask friends or family to fund the business. Individual lenders, such as friends, relatives, or family members may presume themselves co-owner of the business if they lend money. Kabbage doesn’t claim such ownerships. It only funds the business and charges a fair fee for its support.
- User-friendly solutions!
The lender can use the required sum of money and leave the rest in the account. Kabbage will only charge for the money the lender has spent. It does not charge for the entire borrowed amount and that’s quite beneficial for lenders.
- Offering diverse solutions for every business organization’s demands!
Kabbage provides a variety of SME loans to business organizations. It assesses the creditworthiness of the applicant within a few minutes and then recommends the best products for the company’s needs. Thus, Kabbage provides the most suitable financial aid to the applicant.
Kabbage is helping small and medium-sized businesses thrive in the USA and several other countries. It is providing funds whenever the SME demands. Besides, this company is offering personal loans, data, and technology to enable other lenders to help SMEs. Thus, Kabbage is playing an important role in the growth of many small and medium-sized businesses.