Dive Brief:
- Online lender Kabbage will start offering small-business loans that can be repaid in as few as three days, the company said Tuesday.
- Kabbage’s loan payoff timelines previously had been limited to six, 12 or 18 months. But the company is rolling out new custom loans, with terms of three to 45 days, because customers tend to pay off their loans early, Kabbage co-founder and President Kathryn Petralia said.
- Kabbage’s custom loans come with a one-time fee as low as 0.1% depending on the term length and repayment method. They’re available to small businesses using Kabbage Payments — a payment service sponsored by Fifth Third Bank — and feature unlimited online invoicing, next-day deposits and no monthly fees.
Dive Insight:
Businesses can send invoices to customers and create a web link through which they accept payments through Kabbage for a 2.25% fee per card transaction until June. Using the pay link, small-business clients can get paid in less than 24 hours via email, text or online, according to a Kabbage press release published Tuesday.
Small businesses using custom loans can either repay in full upon maturity or designate up to 100% of their Kabbage Payments revenue toward the balance over the period they chose. Repayments are only made when a customer processes payments and any remaining balance is due at the end of the term.
"Small businesses are interested in shorter repayment terms," Petralia told American Banker. "Customers can now decide exactly how long they want to keep the money they borrow."
The product launch comes weeks after Kabbage lost one of its executives to a fintech startup. In December, Kabbage’s chief risk officer, Kaustav Das, joined Petal, a company that offers credit cards to people with little or no credit history. The startup relies heavily on cash-flow analysis to offer credit. And Das, a first-generation immigrant, fits Petal’s target demographic.
"It was important to us that we find someone who can potentially be the architect of a whole new system for credit scoring," Petal CEO Jason Gross told American Banker. "We found someone who not only that has the chops from the credit card industry, but someone who actually played a principal role in the transformation of small-business credit in the recent years."
Das had served as Kabbage’s chief risk officer since 2017, and spent 15 years at American Express, starting in 2002 and finishing as a vice president, according to his LinkedIn profile.
Das will oversee risk management and development of the underwriting, scores and machine learning models.
Petal said it had 50,000 customers as of September.
