Stripe, one of the world’s biggest payment services firms, has now announced its decision to get involved with business finance through a recently revealed endeavour called Stripe Capital. This product aims to provide lending services to its many customers, which will then be returned through future transactions on the customers’ accounts as it passes through the platform. The amounts accessible and suitable repayment plan, will be largely calculated using the customer’s transaction history and activity.
The Stripe Capital page on the company’s website suggests that their existing customers say limited access to funding is ranked as the “biggest obstacle to growth.” What makes this a bit harder is the fact that because of the nature of some of these businesses, financial institutions who should normally be capable of providing funding, usually don’t. The page says:
“Traditional lenders aren’t set up to serve internet businesses, typically requiring lengthy applications, complex collateral obligations and fixed payment schedules. We built Stripe Capital to cut through the red tape. Our goal is to provide access to fast, flexible financing that helps online businesses invest in growth.”
Officially launched on Thursday the 5th of September 2019, Stripe Capital will initially only be available to customers in the U.S. and will focus on small businesses that use Stripe instead of major firms who may not require cash advances. The loans will also be accessible by customers who are directly signed up with Stripe, as well as third party market place outfits who use Stripe Connect.
Co-Founder John Collison has said the company is looking to support businesses that need loans up to a $20,000 maximum and will monitor the customers to decide eligibility. Collison has also said that the financial support for Stripe Capital will be gotten from a banking outfit which Stripe has already partnered with. Collison, however, did not reveal any names.
“We can constantly be looking at the businesses on Stripe, their cash flow, how they are growing, and who can be productively underwritten for a loan.”
According to him, the traditional process of access to a loan could take weeks and maybe even months for an application to be approved. However, Stripe “can see a customer’s historical performance…and apply our machine learning models to do the work, analyzing with no human intervention”, facilitating a loan within 24 hours.
Payment companies have been expanding their businesses to include lending for their many customers. The Jack Dorsey led Square payments platform, revealed in its earnings report for its second quarter that through its Square Capital, it facilitated up to 78,000 loans worth about $528 million.
The report also states that this figure was a 36% increase from the amount loaned in the same period of 2018. Furthermore, the company revealed that Square Capital’s total loans since May 2014 hit 800,000 a total worth of more than $5 billion. Other firms who offer some lending support or the other include PayPal Holdings Inc., and Amazon.