While small online businesses and start-ups often experience lots of trouble securing a loan from top business companies, Stripe objects this view. Stripe has moved to a new banking area: loans. The most valuable private fintech company announced the launch of its lending service venture – Stripe capital. A new project that will help online companies borrow money to grow their businesses in the United States. The launching was after its last funding, having been valued at $22.5 billion. Whenever the companies funded by Stripe Capital will grow, Stripe will also grow.
About Stripe Capital
Stripe Capital considers small internet businesses as engines for job creation in the global economy. For this reason, it prides itself in meeting the dream of every small business owner by providing capital to the business at a very low-interest rate. Funding for such businesses will be given at any time for as long as the business has met the requirements.
Stripe Capital services will first be availed to specific businesses in the US. The loans will be approved based on factors like payment volumes, payment frequency, percentage of repeat customers, changes in revenue growth, and a company’s history on Stripe. Stripe Capitals‘ future plan is to offer greater services to almost every business under Stripe.
This San Francisco-based company has now joined thousands of other tech companies competing with banks to provide loans to small businesses. Some competitors of Stripe Capital, Square, and PayPal, reported substantial growth in their loan portfolios as soon as their businesses had reached the 2nd quarter from commencement.
The giant E-commerce business, Amazon, is now offering a similar venture to merchants via their loaning platform – Amazon Lending. It is, therefore evident that this new undertaking has significantly contributed to the growth of online payment platforms. The innovation has attracted investments from Peter Thiel, Elon Musk and arm Capital G, Andreessen Horowitz, Kleiner Perkins, among others. Why then shouldn’t Stripe Capital give it a try?
Basically, the loan amounts will be averagely lower than what banks fund small businesses. For instance, a small internet business will receive a loan ranging from $6,000-$7,000. With other factors put in consideration, they could sometimes get amounts like $500. The borrowed funds reach the user’s account as soon as the next day after a successful application. The businesses are expected to pay this loan as soon as they start earning.
Why go for Stripe Ventures?
• No more FICO scores. Obtaining a loan is now quicker – Stripe Capital does not use the FICO score to assess creditworthiness. Instead, they only rely on the payment history from their own platforms. This, in turn, eliminates very lengthy applications as loan eligibility is determined within the shortest time possible.
• Pay-when-paid – Unlike many loaning platforms, Stripes Capital does not collect its loan repayments as soon as a business’s sales come through. Instead, it sets payment dates on the 15th day of the month or any other arbitrary day. Repayments are automated. A fixed percentage of the total sales is deducted until the whole amount owed is fully paid.
• Accessibility – Access is not just limited to the specific businesses that run on Stripes. Instead, other platforms needing funding can as well access capital from Stripes for as long as they have hit the minimum requirements.
• One flat rate – a constant flat fee rate is charged. No compounding of interest charges, late fees or collateral obligations.
It is healthy to not only think about financial inclusion in terms of consumers but also in terms of businesses. Funding of small businesses and start-ups should thus be trivially simple. This will ensure smooth cash flows and give them a chance of investing in their own financial growth.