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Stripe Capital

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Re: Stripe Capital

#111

Post by hammock »

BukhariH wrote: post #101
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…

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/1RH9PpJ9kdB7X…

You didn't include the fee in the payback, and you are confusing monthly with annual interest rates

Re: Stripe Capital

#112

Post by Meekro »

My company was auto-enrolled in the Stripe Capital beta some weeks/months ago (not sure when). I never accepted the money. Here's what they offered:

$12,500 advance; $1,250 fixed fee; 3.8% of sales towards repayment.

$18,500 advance; $1,850 fixed fee; 5.6% of sales towards repayment.

$25,000 advance; $2,500 fixed fee; 7.6% of sales towards repayment.

My company grossed $45,600 MRR this August. I love Stripe and swear by it, but I don't really understand why someone in my position would want this offer. The highest amount represents only about 17 days of revenue.

Re: Stripe Capital

#113

Post by pc »

zaroth wrote: post #110
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…

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 mor…

Interesting idea!

Re: Stripe Capital

#114

Post by downandout »

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…

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!

Not everyone has a credit card with a $25,000 limit on it. That really is the point of factoring future receivables like this. Stripe has visibility into your income that a traditional lender does not have, and can use this data to make loans that traditional banks and credit card companies would not make. That has value to people with more limited credit options than you apparently have, and is well worth the fees that Stripe is charging to the businesses that need it.

Re: Stripe Capital

#115

Post by asah »

nodesocket wrote: post #66
amirhirsch wrote: post #47

Earlier quoted context omitted.

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.

That’s what I was wondering if you switch over to Braintree after taking the Stripe loan and just leave a small percent of transactions on Stripe you can have the loan be many years lowering the APR to compete with a small business loan. How are they going to know you switched transactions over to Braintree? Could just be business slowing down.

Naively, I'd guess you can build an ML model to detect the difference...

Re: Stripe Capital

#116

Post by BukhariH »

hammock wrote: post #111
BukhariH wrote: post #101

Earlier quoted context omitted.

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/1RH9PpJ9kdB7X…

You didn't include the fee in the payback, and you are confusing monthly with annual interest rates

Is the fee not charged upfront - that's why I excluded it from the payback period.

Ahh you caught the mistake with the interest periods! Thanks!

Re: Stripe Capital

#117

Post by TazeTSchnitzel »

Klarna, a Swedish competitor in some European markets, has been offering an identical fixed-fee repay-as-you-earn business loan to its customers, and even customers of some other e-commerce firms, for a while now.

English press release: https://www.klarna.com/international/press/klarna-launches-b...

Swedish marketing website: https://www.klarna.com/se/foretag/products/foretagslan/ (they claim it's available in the UK on that page, but I can't find a UK marketing page for it?)

Re: Stripe Capital

#118

Post by a13n »

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 think if you can make your model work with a competitive APR then you'll take over the world. At 20% APR I would guess it's just not worth it for the majority of businesses (ourselves included).

Re: Stripe Capital

#119

Post by [deleted] »

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.)

[deleted]

Re: Stripe Capital

#120

Post by jonknee »

throwaway_law wrote: post #69
u10 wrote: post #50

Earlier quoted context omitted.

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.

>Most businesses won't have access to bank rates 50-60% would violate most if not all usury laws, unless you are a bank. Even in my state the usury is capped at 18%, so to even charge 20% you have to be a bank or its an illegal loan.

Usury laws typically apply to consumers, not loans to businesses. They also probably wouldn't count this type of financing as a loan. Regardless, this exact method of financing already exists and is very popular so I'm going to go on a limb and say that it's legal.
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