In a world of corporations and big banks, the American dream of starting a business from the ground up is becoming harder to achieve. Getting loans and documentation of credit takes a long time and it is easy to lose steam and become discouraged when banks keep saying no. Meet Kabbage, a unique fintech company that sets out to help small businesses and start-ups get the funding they need to be successful. We talked to Co-founder and President, Kathryn Petralia, to get the inside scoop on what separates Kabbage from the rest of the financial world.
1. Where do things stand in the lending marketplace for small businesses to obtain funding?
Small business lending is accelerating largely due to the customer experience and easy access to funding. It's not that banks don't want to serve small businesses. They do, but it's difficult to do so in a cost-effective way. It costs a bank the same to underwrite a $5K loan or a $5M loan. Because of this, small businesses have been widely underserved. Kabbage is unique in that it provides an entirely automated lending service. Using big data and real-time connections with its customers, small businesses can apply, qualify and access a line of credit up to $150,000 in under ten minutes, without having to visit a bank or reapply for future funding. New approaches like this are super-charging the small business lending world, as well as small businesses, with growth and new possibilities.
2. How does Kabbage work?
Small businesses connect basic business data to Kabbage, allowing us to assess credit worthiness in minutes without requiring elaborate documentation, long-approval times or costly manual processes. Customers receive a decision right away, and qualified small businesses have access to an ongoing line of credit up to $150,000. They can take the amount they need whenever they need it, without additional fees, hidden fees, and there are no pre-payment penalties.
3. What kind of businesses are you looking for and why?
Kabbage helps any small business in any industry, from restaurants to construction, salons and spas, auto dealers and retailers. To qualify with Kabbage, a business needs to have been operating for at least one year and have a minimum of $50,000 in annual revenue or $4,200 per month over the last three months. Customers use Kabbage funding to manage cash flow, hiring and marketing as well as long-term needs such as business expansion or strategic investments.
4. What are the advantages of receiving funding through Kabbage rather than a bank?
The first advantage is time. Time is precious to small business owners. With Kabbage they can receive access funding in minutes, not weeks. The second advantage is a data-driven, ongoing partnership. We have a persistent connection to our customers and their business data, allowing us to provide them the capital they need whenever they need it. They never have to walk into a bank or reapply for funding. It allows our customers to focus on building their business and not on banking.
5. What is “alternative lending" and how is it changing small business lending?
Aside from what's provided above, it also helps remove any bias in the lending process. As it's entirely online, automated and analyzes objective business data, the process is 100 percent blind to age, race, gender and background. It removes any discouragement to apply for funding, freeing small businesses to have a chance to grow.
6. What is the future of small business lending now that alternative lenders are growing?
You'll see banks continually adopt these processes. Because it's entirely online, banks don't need to have brick-and-mortar locations to serve their customers. They only need an internet connection. It allows them to expand and reach new customers without heavily investing in new locations or operational costs. Kabbage partners with top global banks such as ING, Santander and Scotia Bank, allowing their small business customers to access funding in a more streamlined manner and have a significantly better customer experience.
7. How did you get involved in this industry?
I have over twenty years of experience working with large and small companies focused on credit, payments and commerce. It was the late 90s when I began to work in alternative lending so when co-founder Rob Frohwein approached me with his idea for Kabbage I immediately saw the value in using technology to reexamine the lending landscape. I could see that the lengthy, manual process that was used for funding decisions could be automated based on access to real-time data generated by numerous business operation.
8. What are the challenges facing women in the tech and banking world?
In recent weeks and months news of sexual harassment has spread across tech and fintech. The reactions I've seen by male VCs and leaders have included plans to “avoid meeting 1:1 with women". This is a massive step backwards and doesn't address the issue of culture in these organizations. It is incumbent upon both men and women to be beyond reproach in this regard, and creating distance between the genders is bad for women and it's bad for business.
9. What advice do you have for girls and young women looking to break into fields that have been traditionally dominated by men?
Although I haven't always been able to seek out a mentor, taking the time to find other women in these fields for advice and gain a new perspective on career paths is a great way to learn and network. There are some wonderful organizations out there for both girls and women that are really helping to break down barriers that previously stood in the way for women to have successful careers traditionally dominated by men.
Photo Credit: afewgoodclicks.com
In 2016, Renee Wang sold her home in Bejing for $500,000 to fund her company, CastBox. Two months later, she landed her first investment. Just a half hour after hearing her pitch, she was offered one million dollars. By mid-2017, CastBox raised a total of $16 million in funding. CastBox's user numbers at that point? Seven million. Fast forward to today. Renee Wang of CastBox announces a $13.5 million Series B round of financing, bringing her funding total to a tidy $29 million. CastBox is now serving more than 15 million users.