Stripe Capital • Hacker News Board

Re: Stripe Capital

#101

Post by BukhariH » Thu, Sep 05, 2019, 6:52 PM UTC

pc wrote: post #59

jawns wrote: post #25

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, supp…

[Stripe cofounder.] > 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. Yes, this is right -- if your business suddenly s…

I really love what Stripe are doing here - whilst yes the the APR can be quite considerably higher. That's fair since Stripe are taking on quite a fair bit of additional risk.

As the borrower this loan is significantly de-risked since there aren't any dreaded monthly payments you must make.

Here's my attempt at a quick interest calculator for Stripe Capitals loans: https://docs.google.com/spreadsheets/d/1RH9PpJ9kdB7X4xcZvqb7...

Re: Stripe Capital

#102

Post by fblp » Thu, Sep 05, 2019, 6:53 PM UTC

Shopify capital is similar. The APR can be high, but then you usually can't get loans on that short term. Also seems to be very popular with shopify.

Re: Stripe Capital

#103

Post by hammock » Thu, Sep 05, 2019, 6:53 PM UTC

pc wrote: post #59

jawns wrote: post #25

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, supp…

[Stripe cofounder.] > 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. Yes, this is right -- if your business suddenly s…

What's stopping a business from getting a loan and then transferring the funds - and directing part/most of their future receivables - to another entity, in order to drag out the loan term?

Re: Stripe Capital

#104

Post by harshadante » Thu, Sep 05, 2019, 6:54 PM UTC

louisknows wrote: post #58

Does Stripe offer (or will soon offer) a similar loan program for EU based businesses?

Just in the US right now. We know the need for capital is global, and we’re working to expand this to EU businesses soon! However, we don’t have a specific timeline at the moment.

Re: Stripe Capital

#105

Post by uerobert » Thu, Sep 05, 2019, 6:54 PM UTC

jawns wrote: post #25

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, supp…

This is what is known as Merchant Cash Advance (MCA) https://en.wikipedia.org/wiki/Merchant_cash_advance, nearly every business with at least $20k credit/debit card sales a year has access to through their payment processor, bank, or companies that specialize in that sort of arrangement, of which there are tons. It is not a loan, what you are doing is basically selling your future card sales at a discount.

Re: Stripe Capital

#106

Post by acd10j » Thu, Sep 05, 2019, 6:54 PM UTC

jawns wrote: post #25

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, supp…

I think this is good model, Good performing business always have option of taking loan from alternative places instead of Stripe at better rate. Fixed fees no compounding helps businesses avoid debt trap. Which is a reason of so many business failures.

Re: Stripe Capital

#107

Post by antaviana » Thu, Sep 05, 2019, 6:54 PM UTC

pc wrote: post #59

jawns wrote: post #25

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, supp…

[Stripe cofounder.] > 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. Yes, this is right -- if your business suddenly s…

Is there any expectation or obligation that all proceeds of the business are handled by Stripe?

I mean, if you have several payment methods on your website, one resource to improve your APR could be to make more promiment other payment methods for the duration of the loan.

Re: Stripe Capital

#108

Post by pc » Thu, Sep 05, 2019, 6:56 PM UTC

laurentb wrote: post #78

pc wrote: post #59

Earlier quoted context omitted.

[Stripe cofounder.] > 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. Yes, this is right -- if your business suddenly s…

In this case, then surely showing a calculator straight on the page allowing people to see what APR they would get based on their payment/sales configuration would make the whole process more transparent and easier to understand by people who might not be savvy enough to understand the nuances then?

Yeah, we've iterated a lot (and done a lot of customer interviews) to try to figure how to make the presentation as simple-to-understand as possible. It's hard to show a (de facto) APR precisely because it will depend on your subsequent sales. (And showing it could even be confusing because there's no compounding with our fee structure.) All that said, one of the key questions we care about when speaking with customers, prospective and current, is "Are the terms clear?". And if coming up with some kind of APR-equivalent modeling thing helps achieve that, we'll do it!

Re: Stripe Capital

#109

Post by kryogen1c » Thu, Sep 05, 2019, 6:56 PM UTC

pc wrote: post #59

jawns wrote: post #25

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, supp…

[Stripe cofounder.] > 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. Yes, this is right -- if your business suddenly s…

Just popping in to say this is one of the most impressive C-level replies i have ever seen. Straight acknowledgement of the criticism from OP, but explains the reasoning and demonstrates the benefit to both customer and stripe. Closes with willingness to change if business model doesnt produce results matched by test market. Doesnt read as defensive or marketing buzzwordy, just straightforward and simple.

I hope to one day open some businesses and be cursed with high performance and pay a penalty to stripe.

Re: Stripe Capital

#110

Post by zaroth » Thu, Sep 05, 2019, 6:56 PM UTC

pc wrote: post #59

jawns wrote: post #25

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, supp…

[Stripe cofounder.] > 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. Yes, this is right -- if your business suddenly s…

It would a nice benefit if you could discount the credit card processing fees during the repayment period.

E.g. You charge a 10% upfront fee for the loan, and repay at a 10% rate, from the perspective of the company they’re actually paying 12.9% to Stripe during repayment.

If you could pay just the 10% or even if you just got a .5% reduction to 12.4% overall going to Stripe during the repayment period, it becomes more of a win-win and a nice customer loyalty type bonus.