Kabbage, Disrupting The Loan Industry For Smes: Ken Research


According to the study, Fintech Profile: Kabbage, major Kabbage has partnered with SoftBank, Santander, Scotiabank, ING Group, Thomvest Ventures.

Kabbage is an Atlanta based financial technology firm. The company aims to provide direct funding to small businesses and even consumers via an automated funding distribution platform. Rob Frohwein, Marc Gorlin, and Kathryn Petralia were the founders of Kabbage Inc., which was set up in 2009 but began operation in 2011. To qualify for a small business loan, Kabbage has set certain revenue criteria to make it eligible. The minimum revenue that a business should have is USD 50,000 per annum or USD 4,200 per month for the last three months.

Kabbage follows a simple process of dispersing funds to the small and medium enterprises.  They initially make sure that the whether the business is eligible for loan or not. Followed by dispersion of funds and later, the business can easily use this fund to make payments. Kabbage functions primarily in two areas of business and these are small business loans and invoice payments. The small business loans allow very small firms to obtain loan and expand their business without being restricted by limitations as sent by traditional loan providers. The small business loan allows business people to maintain control over their business. For instance if a firm decides to expand by going public or calling aboard a potential investor, the profits and decision making authority shall have to be shared with all the partners. Another benefit small business loans provide is that, the business does not have to undergo a rigorous qualification process. It prevents mixing of personal and business relation if a loan is taken from a personal contact.

Mixing personal and business funds can create problems down the line which can be prevented by small business loans. Kabbage also allows business people to line up to an amount of USD 250,000 that can be used by them for their working capital requirement as and when it is needed. The key USP of Kabbage lies in its ability to process loans for small companies quickly by assessing their creditworthiness using proprietary technology which functions on customer data. The data is analyzed within minutes, an interest rate is set and the funds are dispersed. Another key feature of Kabbage is that the loan application form can be processed via an Android or an Apple phone within minutes without involving any cost. Alongside this, business can link multiple payment options of eBay, PayPal to that allows Kabbage to analyze and give proper loan guidance. Not only this, Kabbage does not try to overload a business with funds but allows technology to decide on the amount of funding that is essential for the business.

In early 2017, Kabbage raised funds from Softbank to expand its operations and to improve on its technology followed by funding from Credit Suisse which primarily focused on improving the application of its Artificial Intelligence technology. Kabbage taps on small and medium enterprise segment that has been ignored by large banks due to their strict policy grant loan. The growth potential in this segment is immense and Kabbage is expected to register high growth in the coming years.

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