Stripe Goes into Business Lending with New Cash Advance Service
Payment processing tech startup Stripe Inc. today entered business lending with a new service that offers online business lending in the United States.
Called Stripe Capital, the loan service is launched today with a built-in cash advance service. Loan requests are assessed using Stripe’s existing customer data, eliminating the need for a lengthy application process. Stripe said the approved funds will usually arrive in the customer’s account the next day.
Describing the problems small businesses, especially online businesses, have in obtaining loans from banks and other financial institutions, Stripe presents Stripe Capital as making it “easy for Internet businesses to get the funds they need, when they need it ”.
“Those who succeed in obtaining loans report spend over 25 hours on applications and paperwork, then wait weeks or months for approved funds to actually be available, ”Stripe said in a statement. “Startups and small businesses to create a disproportionate number of jobs, yet these are precisely the companies with the most restricted access to capital. As a result, easier access to capital has been one of the top demands of Stripe users over the past couple of years. “
The reimbursement method used for the product is particularly remarkable and arguably innovative. In addition to not charging interest or fees for late payments, Stripe also does not have a fixed repayment schedule. Customers repay the loan with a fixed percentage of daily sales, which means that the amount repaid and the repayment term of a loan vary based on sales.
The service is available not only for businesses running Stripe directly, but also for platforms and marketplaces on Stripe Connect. This service enables marketplace owners and other businesses to enable their merchants and customers to accept credit card payments.
Stripe isn’t the only fintech company providing business loans. Rivals Square Inc. and PayPal Holdings Inc. both offer small business loans and saw significant growth in their loan portfolios in the second quarter, CNBC reported. Amazon.com Inc. also offers a similar service to merchants in its payment network through Amazon Lending.