In the time it takes to brew your morning pot of coffee, small business owners can get working capital they need to grow their business.
Kabbage, an online small business financer, has lent more than $85 million over the last few years to online merchants selling on eBay, Amazon, Yahoo and Etsy.
"In a nutshell, we provide working capital to small businesses," said Kathryn Petralia, chief operating officer and co-founder of Atlanta-based Kabbage. "We do this through an automated underwriting process that takes our customers from being on our site to having cash in their PayPal account in an average of seven minutes."
Business owners can sign up with their store login and bank account information as well their Social Security number. Kabbage will then check a number of sources, including checking accounts, Google analytics, UPS shipping data, QuickBooks info and such social media platforms as Facebook and Twitter to determine eligibility.
"As long as you are a business and we can get access to the data, there are very few situations where we would say no to a customer," Petralia said. "It is really a matter of a customer not providing enough data sources."
Small businesses benefit from the service in a number of ways. Perhaps the chief benefit is businesses are able to obtain capital they otherwise would not have gotten without having to risk putting up personal assets as collateral. Kabbage provides up to $50,000 to companies and will put the money into either a PayPal or Automated Clearing House (ACH) account associated with the business.
"Kabbage uses capital it raises for that purpose to extend funds to our customers so we take the risk," Petralia said.
Businesses pay Kabbage between 2 and 7 percent of the original advance at least and between 8 and 18 percent at most. Repayments depend on monthly revenue and a company's Kabbage score. Repayments come directly out of PayPal or ACH accounts and are on a six-month repayment plan.
Businesses using the service have seen average revenue growth of 240 percent after taking cash from Kabbage, Petralia says.
"Small businesses need the same things that big businesses need and they need money to grow," Petralia said. "[The difference between us and a bank is] we say yes. Small businesses who want less than $100,000 have never had easy access. Banks generally don’t make enough to underwrite those loans. Add that to the fact that small business owners tend to have deflated credit scores because of their businesses and that removes them farther from the opportunity of borrowing from a bank."