US online small business lender Kabbage has raised a mammoth $US135 million (£87.9 million) from investors including US investment group Reverence Capital Partners, Dutch bank ING, Santander’s venture capital fund InnoVentures, and Canadian bank Scotiabank.
China’s Yuan Capital and Japan’s Recruit Strategic Partners also took part in the “Series E” round, and existing investors BlueRun Ventures, UPS Strategic Enterprise Fund, and Thomvest Ventures also participated.
It takes the total raised by Atlanta-based Kabbage to $US240 million (£156.3 million). Kabbage, which lends from its balance sheet, also announced it has tripled the amount it can lend to $US900 million (£586.1 million) thanks to investment from hedge funds, pension funds, investment management companies and more.
Kabbage co-founder and CEO Rob Frohwein says in an emailed statement announcing the deal:
We are thrilled to announce our partnership with Reverence Capital Partners, ING, Santander InnoVentures, and Scotiabank, global leaders with deep expertise across financial services and technology.
It is particularly gratifying to welcome three of the top fifty global banks to our shareholder base as we continue to expand our reach internationally, delivering an unparalleled experience to small businesses and consumers worldwide.
Kabbage, founded in 2009, lets small businesses borrow up to $US100,000 (£65,100) in the US or £40,000 in the UK online. Like Wonga in the UK, Kabbage’s loan applications are totally automated making them super quick — the company claims you can sign up in as little as 7 minutes. Loan applications are highly reliant on data from sources as diverse as PayPal and Facebook.
Peter Renton, founder of global peer-to-peer conference LendIt, told BI recently: “Kabbage is the most innovative small business lender on the planet. They deliver a loan to a small business lender in 7 minutes. The way they do it is they connect all the data and the more data you connect with them, the cheaper it’s going to be.
“It started off with eBay data. They pull in all your eBay data and see what’s your daily sales volume, ratings. Now they pull in dozens of sources — UPS data, Amazon, QuickBooks, Yodlee, Yelp, Facebook. They’re doing things that would have been impossible 10 years ago, that probably would have been impossible 5 years ago.”
However the loans, which can last anywhere between 1 and 10 months, carry sizable interest rates — again, like Wonga. Kabbage’s representative annual percentage rate (APR) of interest is 68% according to its website. For comparison, rival small business peer-to-peer lender Funding Circle’s APR is between 13% and 18%.
Kabbage launched in the UK back in February 2013, but currently only offers eBay and PayPal credit lines here.
COO Kathryn Petralia told financial consultancy Lafferty in June: “We are waiting for all the FCA [Financial Conduct Authority] regulations to come through because we are a licensed lender in the UK and we don’t know if our licence is going to be renewed. Thanks to Wonga, I suppose, we are struggling, and everyone else is too.”
Wonga came under pressure last year after it emerged it was sending fake legal letters to users who were behind on payments. That spurred the FCA and the UK’s Competitions and Markets Authority to crack down on so-called “pay day loans” — short-term, high-interest credit lines.
Kabbage says it is now lending $US1 billion (£650 million) to small businesses globally each year.