How does this compare to Square Capital? IIRC that business has been around for years. Same with Kabbage (SoftBank-backed).
Point is, I’m pretty sure SMBs have had a lot of options outside of traditional banks for awhile now.
Stripe Capital
41–50 of 283 posts
Re: Stripe Capital
#42The 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, supp…
It seems a bit as though the model is set up for independent operators and 'Mum & Pop' shops that use Stripe but don't have the business acumen to see the issue. Or, people who have a good history of selling with Stripe, but, lack the credit rating, history or collateral to use other lenders. It's a very carefully and cleverly thought out payment model, which leads me to believe they knew exactly which consumer base…
You nailed it on the last point. It also greatly helps small stores that have highly variable sales. Like with my ebay shop I can go days without selling anything, then have a weekend where I pull a few grand.
Re: Stripe Capital
#43What's most interesting about this is that, reading between the lines, this is effectively an income share agreement for businesses, capped to the loan amount: you pay back a percentage of your revenues until you hit the cap.
This could be huge, and Stripe is perfectly positioned to execute on this.
Re: Stripe Capital
#44Welcome Stripe :)
Let’s keep making access to capital better!
(https://clearbanc.com) (https://20mintermsheet.com)
Re: Stripe Capital
#45The 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, supp…
structured repayment of the loan -- fixed fee, dynamic loan term -- is is an interesting way to make it hard to compare against other lenders
You would need to consult an appropriate scholar to be sure, but it could be to be compatible with Islamic finance, which prohibits charging interest. Some banks do mortgages structured around fees rather than interest too.
Re: Stripe Capital
#46The 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, supp…
Harsha from the Stripe Capital team here. We’ve designed the program so that most offers take about 8-12 months to pay back, and therefore the repayment rate would change to reflect that projected duration (which would ultimately impact the APR). The 15% repayment rate you see on the landing page is just an example.
We do think this is a significantly improved overall user experience—it works straight out of your Stripe account. It’s automatic, based on your sales. The cost of the loan is a single fixed fee that adjusts to the loan amount paid over the course of the loan—there is no interest rate or additional fees. The effective APR is dependent on how long it takes to repay the loan.
Re: Stripe Capital
#47The 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, supp…
If it seems like you were paying it back too quickly you should switch most of your sales to another payment provider like PayPal or Square to throttle your Stripe revenue lowering your effective APR until it's compatible with a bank line-of-credit.
Re: Stripe Capital
#48Here'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…
Innovative? Do a quick google search for POS Lending ;). This is a standard offering for most financial institutions that do merchant acquiring. But I'm sure Stripe will greatly improve the experience.
Yes, a greatly improved experience is exactly Stripe's MO. That is innovative in my book.
Re: Stripe Capital
#49Square had similar program called Square Capital. I actually didn't make the last 2 paymenta totaling around $2500 and they stopped emailing me after a while. No collections nothing
Re: Stripe Capital
#50The 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, supp…
Alternative financing is always going to be expensive. Most businesses won't have access to bank rates, so they often have to access capital via alternative lenders (factoring, Merchant Cash Advance, high-interest fixed-term loans) that often charge upwards of 50-60%.
Comparatively, 20% APR isn't so bad.