Square 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
lol what so you got $2500 for free?
Stripe Capital
161–170 of 283 posts
Re: Stripe Capital
#162Earlier 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…
Very neat idea. But I worry that it's vulnerable to bad people. Got a hefty personal bill coming up, and you're pretty confident your SaaS business will be dead within 6 months but Stripe has no way of knowing based on current numbers? Thinking of getting a divorce (startup or marital)... maybe time to grab the largest advance possible before your soon-to-be ex(-co-founder) realises? The problem is that even if only…
I'm not an expert on small business loans, but I would guess that incentives take care of most of this problem. The higher the loan you have, the more cash your business must have been generating in the first place, therefore the higher incentive you have to figure out how to keep it running. There probably aren't too many scenarios where you are both eligible for a material loan from Stripe and yet not highly enough incentivized to figure out how to make the business work to the best of your abilities.
Re: Stripe Capital
#163Earlier quoted context omitted.
Very neat idea. But I worry that it's vulnerable to bad people. Got a hefty personal bill coming up, and you're pretty confident your SaaS business will be dead within 6 months but Stripe has no way of knowing based on current numbers? Thinking of getting a divorce (startup or marital)... maybe time to grab the largest advance possible before your soon-to-be ex(-co-founder) realises? The problem is that even if only…
>> "But I worry that it's vulnerable to bad people." You worry too much for them, that's why they charge a hefty interest fee. A certain % of non-payments or partial payments are built in.
They probably have some data science and a decent fraud model to keep risk within an acceptable band too.
Re: Stripe Capital
#164Earlier quoted context omitted.
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?
I have worked in the small business lending space before. Stripe cannot price in terms of APR because legally, it is not a "loan". It's a purchase of future receivables. If it was a loan, the APR would be considered usurious in most states.
In most states aren't loans for commercial purposes (or to certain kinds of entities [c-corps, llcs, partnerships] assumed to be commercial) are exempted from usury restrictions?
Re: Stripe Capital
#165Stripe is really coming after Square. Square Capital is an extremely similar product (prequalifies you & autopays based on your payment volume). Square has a platform / payments SDK but if you look at the Github repo it's a disorganized mess versus Stripe's with virtually no "stars".[1] There's also Stripe Terminal which is a platform-y approach to Square's register/terminal. I wonder how much longer until they go af…
Klarna has an identical product here in Europe too.
And iZettle (also a Swedish startup, recently acquired by Paypal) has the same service:
https://www.izettle.com/gb/advance
So nothing new here.
Re: Stripe Capital
#166Earlier 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…
Purely out of curiosity - and you may not be able to, or may not want to answer - but how does a company like Stripe structure this sort of business? Are you making loans right out of your working capital, or do you have separate debt obligations of your own to cover these, or something else? I would imagine this sort of thing is regulated somehow, but I don’t really know... would love to hear whatever you can share!
Surprisingly, this is a totally unregulated industry on the federal level. Legally, they aren't loans; it's a purchase of future receivables. Google "merchant cash advance regulation" and have your mind blown.
California has light regulation in the form of disclosures similar to those for consumer credit. CA is also the only state that requires any licensing but the license is for the company, not for any of the brokers, and is super easy to obtain.
Re: Stripe Capital
#167The 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…
This seems like a relatively standard MCA product, at better rates than typical MCA providers. Stripe's betting its underwriting is superior (very likely) and it has a lower cost of capital than competitors. Square Capital does the same thing.
It seems novel for folks outside the industry but businesses are bombarded by MCA adverts on the daily and have been for years.
Re: Stripe Capital
#168Earlier 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…
Purely out of curiosity - and you may not be able to, or may not want to answer - but how does a company like Stripe structure this sort of business? Are you making loans right out of your working capital, or do you have separate debt obligations of your own to cover these, or something else? I would imagine this sort of thing is regulated somehow, but I don’t really know... would love to hear whatever you can share!
We’re working with banking partners to originate the loans. We’ll fund some of these loans ourselves, and we’ll also work with investors to help us extend even more capital.
Re: Stripe Capital
#169The 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…
Quick question - does this model expand to multi million dollar advances, assuming the cash flow warrants it?
Re: Stripe Capital
#170Earlier quoted context omitted.
>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.
I actually assumed Stripe had a bank license/charter (a quick Google search after your comment suggests they do not).
>Usury laws typically apply to consumers, not loans to businesses.
That may be a fair characterization, but its definitely a jurisdictional issue state to state. I know some States for sure exempt commercial loans, others exempt loans over certain amounts, and some exempt loans to certain businesses by industry (but not a outright exemption on commercial loans).
Obviously Stripe has a good public image, but unfortunately with SV unicorns like Uber, AirBnB, CoinBase (almost any cryptocoin/blockchain start up), its not unfair to say we should just assume business practice comply with the law.