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Stripe Capital

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Re: Stripe Capital

#21

Post by dahdum »

atourgates wrote: post #11
jonknee wrote: post #3

Here's a twitter thread from John Collison detailing why they launched this. It sounds pretty innovative (not exactly a surprise considering it's Stripe!). https://twitter.com/collision/status/1169660488374001664 > Since 2008, loans made to small businesses have decreased in absolute terms by 41%. Banks have been pulling back from SMB lending. > When businesses can get a bank loan, they spend an average of 25 hours o…

Based on the amount of junkmail I get offering my small business loans, I have a hard time believing the "filling a niche no-one else is offering" narrative. We get about 2x mailers per week from AMEX alone offering business loans of up to $500k, not to mention the many other offers we get less frequently. I like Stripe and think the offer a great product, but I don't think they're doing this because no-one else will…

This does seem to be exactly like PayPal Working Capital, down to the application and fee structure.

Re: Stripe Capital

#22

Post by mark242 »

I have the feeling that this will have the same net effect for startups -- or even more -- that Stripe-as-a-payment-gateway also had. This could be an instant accelerator to self-funding.

Re: Stripe Capital

#23

Post by asdf21 »

paggle wrote: post #13

What a fucking amazing company. The biggest challenge in making a loan is getting repaid. When you control the vehicle by which your debtor gets paid by their customers, you can easily and frictionlessly take your repayment without having to make calls and send increasingly agitated letters. Genius

Not legally, they would still need to have a legal order for garnishment, I assume.

Re: Stripe Capital

#24

Post by echelon »

paggle wrote: post #13

What a fucking amazing company. The biggest challenge in making a loan is getting repaid. When you control the vehicle by which your debtor gets paid by their customers, you can easily and frictionlessly take your repayment without having to make calls and send increasingly agitated letters. Genius

Many companies in the payments and small business space already do this. It's not new. Square, PayPal, etc.

Re: Stripe Capital

#25

Post by jawns »

The way Stripe Capital has structured repayment of the loan -- fixed fee, dynamic loan term -- is is an interesting way to make it hard to compare against other lenders, which typical express their fees through APRs.

The term of the loan is variable, and depends on daily sales, but assuming you have a high volume of sales and take out a small loan, the effective APR is going to be through the roof!

For instance, suppose I take out a $25K loan with a $2.5K fixed fee. Now 15% of my sales go toward repayment. Let's say I pull in a little over $30K in sales a month. The loan will be repaid in about six months, and my effective APR is 20%! Might as well put it on a credit card!

You can get a small business loan at FAR better terms elsewhere: https://www.valuepenguin.com/average-small-business-loan-int...

So it seems like the main reason you'd go with Stripe Capital is that they've made the whole process practically effortless.

But one thing strikes me as odd about this whole arrangement. The better a business performs, the quicker it is able to repay the loan, and the higher its effective APR becomes! It's essentially a prepayment penalty in disguise. So you'd better make sure the loan doesn't help your business too much, or you'll end up getting hosed by the loan fee.

Re: Stripe Capital

#26

Post by [deleted] »

dahdum wrote: post #21
atourgates wrote: post #11

Earlier quoted context omitted.

Based on the amount of junkmail I get offering my small business loans, I have a hard time believing the "filling a niche no-one else is offering" narrative. We get about 2x mailers per week from AMEX alone offering business loans of up to $500k, not to mention the many other offers we get less frequently. I like Stripe and think the offer a great product, but I don't think they're doing this because no-one else will…

This does seem to be exactly like PayPal Working Capital, down to the application and fee structure.

[deleted]

Re: Stripe Capital

#27

Post by harshadante »

qrazhan wrote: post #7
jonknee wrote: post #3

Here's a twitter thread from John Collison detailing why they launched this. It sounds pretty innovative (not exactly a surprise considering it's Stripe!). https://twitter.com/collision/status/1169660488374001664 > Since 2008, loans made to small businesses have decreased in absolute terms by 41%. Banks have been pulling back from SMB lending. > When businesses can get a bank loan, they spend an average of 25 hours o…

Square and PayPal both have similar offerings, which piece here do you feel is innovative? (disclosure: I work at Square, but not on Capital.)

Harsha from Stripe Capital here.

A ton of entities supply capital to businesses today -- it's one of the largest markets in the world.

We aren't trying to beat anyone else. We're just responding to the need we heard from Stripe users for a product like this. I think how we do it (in terms of how we model the risk profiles of nascent, capital-light internet business; how we present it to customers; etc.) is all pretty neat. But the innovation, if we succeed, isn't going to be in how the mechanics compare to other products. It's going to be in not hearing from Stripe businesses that access to capital is one of their biggest limiting factors.

Re: Stripe Capital

#28

Post by aznpwnzor »

brianpgordon wrote: post #17
aznpwnzor wrote: post #12

it's smart because they already have cash flow insights and also control your revenue stream. but i wonder how this nets out in terms of: 1. do i want the entity holding my loan to also control my billing/revenue management? 2. aren't smb rates much lower than this usually? so crazy that certain usurious rates are just explicitly allowed

The rates don't seem extraordinarily high to me. What would you consider reasonable? It's not trivial to get an apples-to-apples comparison since loan rates are usually given as an APR, not a flat fee. Also, don't confuse their "% of sales to loan repayment" number with a rate - that just determines how much of your revenue they hold back until the loan is repaid.

yea that's technically a subpoint really that they've made this really hard to compare.

i'm mainly saying it's possibly unreasonable based on the example case they've illustrated.

morally, usury can be one or both of the two:

1. socially deemed over profiting

2. socially deemed high drag on your borrower

i'm using a gut check on #2 here

Re: Stripe Capital

#30

Post by nroach »

asdf21 wrote: post #23
paggle wrote: post #13

What a fucking amazing company. The biggest challenge in making a loan is getting repaid. When you control the vehicle by which your debtor gets paid by their customers, you can easily and frictionlessly take your repayment without having to make calls and send increasingly agitated letters. Genius

Not legally, they would still need to have a legal order for garnishment, I assume.

Garnishment is against accounts held by a third party. If the right to withhold or draw from already-authorized sources is part of their contract on either the payments or lending side (and I can't imagine it wouldn't be), no garnishment should be needed as they're in direct contractual privity.
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