- Stripe, the $US20 billion payments processing startup, is getting into the moneylending business with Stripe Capital.
- Stripe Capital is a service for Stripe customers, allowing them to receive loans of $US10,000 to $US20,000 in as soon as one business day.
- Approval is handled algorithmically, using a company’s history on the Stripe platform to assess the applicant’s business and level of risk.
- John Collison, the president of Stripe, says that Stripe Capital is designed to help small internet companies – which often have trouble getting small business loans – get the working capital they need to grow.
- Not only does this stand to be a strong new business for Stripe, Collison said, but it also makes the overall platform more appealing – and can help lots of new and existing Stripe customers grow, which is good for everybody.
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Stripe is getting into the moneylending business.
Best known for providing credit-card-processing services to customers like Warby Parker and Lyft, the $US20 billion San Francisco startup Stripe has taken another aggressive step into a new market as it chases its goal of expanding the entire internet economy.
This time, that means small business loans, with the introduction of Stripe Capital.
The company bills it as a smarter way for internet businesses to get the working capital they need to grow: There’s no lengthy application; funds are paid as soon as the next business day; repayment happens automatically, as Stripe withholds an agreed-upon amount of the business’ daily earnings on the service until the loan is repaid.
John Collison, Stripe’s president and cofounder, tells Business Insider the service is intended to plug a gap that the company saw in the market. He says it’s harder than ever for a small business to get a loan – let alone a small internet business, which often don’t have real estate or other physical assets to put up as collateral.
Stripe Capital is generally best-suited for making loans of $US10,000 to $US20,000, Collison said. Those loans are backed by a banking partner, though Collison declined to share who that partner might be.
Those amounts aren’t much in the grand scheme, Collison said, but it can make all the difference in the universe for a company that needs to buy more servers or pull off a crucial marketing campaign to take things to the next level – a “nitrous boost” that can help a company “take off a little bit faster.”
Stripe Capital is open only to those who already use Stripe to take payments. That’s important because as Collison notes, the company uses an applicant’s history on the platform to make a data-driven decision on whether or not to approve the loan – the kind of data that a bank or other traditional lender might not have access to.
“We are looking at the corpus of businesses running on Stripe,” Collison said, to make fast decisions. While he acknowledged that algorithms could introduce bias into any equation, he said that it was a game of give-and-take. After all, he said, Stripe’s automated approach isn’t prone to the proven biases of any human reviewer, and it can approve more applications, faster.
What Stripe gets
For Stripe itself, Collison said that there were three major ways the company stood to benefit from moving into this new line of business.
First off, Collison said, there’s the interest paid on the loans themselves. Other companies like Square and Intuit have carved out lucrative niches for themselves in the moneylending business, though Stripe’s focus on internet businesses helps set Stripe Capital apart, Collison said.
Second, there’s the fact that it makes Stripe itself far more attractive as a vendor, Collison said. Stripe already offers its customers the Stripe Radar fraud-detection tool and benefits like chargeback protection. Adding the access to fast, easy capital is just one more reason why small businesses should choose Stripe, Collison said.
“We think this makes the overall Stripe proposition more compelling,” he said.
And finally, Collison said, there’s the tie-in to Stripe’s oft-repeated mission of increasing the GDP of the internet. Access to capital is a limiting factor for all kinds of online businesses, and the more Stripe can do to alleviate that burden, the better, Collison said. In so doing, it stands to increase both the number and scale of potential Stripe customers, he said.
“We think that Stripe will end up doing really well when we complete that mission,” Collison said.