Is Kabbage Gearing Up To Buy OnDeck?


Small business lender Kabbage is reportedly looking to pick up a new round of equity funding for the purpose of making potential acquisitions.

One of the acquisition targets? Rival SMB lender OnDeck.

OnDeck Capital, Inc has market capitalization of $321 million at present, meaning it won’t be a cheap buy. But OnDeck has seen its share price drop 80 percent since first going public in 2014, and as of February of this year had posted five straight quarters of losses. And more losses are widely expected to come — OnDeck has already publicly noted that it has been forced to set aside additional funds for future losses after determining its calculations in its internal models were off.

Earlier this week, OnDeck announced it had amended its asset-backed revolving credit facility with Deutsche Bank to extend its maturity date to March 2019 and to increase its borrowing capacity by $52 million, to a total of up to $214 million.

OnDeck is a marketplace lender, which means it has been caught up in the same cool-down that has been depressing the share price and economic activity of its fellows in the marketplace lending niche like Prosper and LendingClub.

Kabbage runs a platform that provides loans to small businesses in minutes — but it is not known as a marketplace lender.  Its existing investors include Reverence Capital Partners, SoftBank Capital, Thomvest Ventures, Mohr Davidow Ventures, BlueRun Ventures, the UPS Strategic Enterprise Fund, ING, Santander InnoVentures, Scotiabank and TCW/Craton. As of last year, Kabbage had also entered a strategic partnership with Banco Santander SA to provide loans to small businesses in Britain. JPMorgan Chase & Co works with On Deck.

Kabbage announced earlier this month that it has priced the largest asset-backed securitization of small business loans in the online lending industry. That means it will be selling about $525 million worth of loans to investors, which Kabbage says will allow it to up its loan volume to around $2.7 billion.

Kabbage, based in Atlanta, could not immediately be reached for comment. Sources who spoke to Reuters about this story cautioned that no decisions have been made and asked not to be identified because the deliberations are confidential.