Small-business lender, Kabbage, will soon be white-labeling its service to a large financial services company. The online lender recently secured a $270 million credit line from Guggenheim Securities, the investment arm of Guggenheim Partners.
Kabbage and other online lenders target the lengthy list of merchants that are looking for relatively small loans. Kabbage, CEO, Rob Frohwein, explains this methodology, “mainstream lenders cannot economically acquire these customers. I think that banks like the space, but they have a lot of regulatory and risk debit right now that makes it hard for them to either re-enter or meaningful enter these markets," reports TechCrunch,
Bank lending to small businesses increased in March for both credit unions and community banks, while loans from big banks decreased slightly. Rates from alternative or online lenders also fell month over month in March. For Kabbage, this is hopefully a sign of things to come and the customer base will expand past the 25,000 existing customers. Frohwein estimates that 15-20 million online business are currently in need of capital and the company is “excited about the fact that we’re able to identify good customers on the front end and manage them on the back end”.
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