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Stripe Capital

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Re: Stripe Capital

#171

Post by icelancer »

hammock wrote: post #103
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…

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?

Commercial credit markets are incredibly tight, which is the biggest thing for loans under 25k.

Re: Stripe Capital

#172

Post by TuringNYC »

eloff wrote: post #84
lotsofpulp wrote: post #63

Earlier quoted context omitted.

Any transaction of money in exchange for time is interest.

But religion, unlike laws, thrives on technicalities. Some Jews won't push a button in an elevator on the Sabbath, but it's fine if its programmed to stop at every floor.

In a similar way, there is also the Sabbath Wire: http://mentalfloss.com/article/91594/theres-wire-above-manha...

18 miles of translucent wire stretches around NYC called an eruv:

On the Sabbath, which is viewed as a day of rest, observant Jewish people aren't allowed to carry anything—books, groceries, even children—in public places (doing so is considered "work"). The eruv encircles much of Manhattan, acting as a symbolic boundary that turns the very public streets of the city into a private space, much like one's own home. This allows people to freely communicate and socialize on the Sabbath—and carry whatever they please—without having to worry about breaking Jewish law.

Re: Stripe Capital

#173

Post by davidandgoliath »

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…

That's far more compelling. If a % of the ~$15k+ we give stripe annually (via cc processing fees) went towards loan repayment, we'd likely have perpetual loans open :)

Re: Stripe Capital

#174

Post by chirau »

pc wrote: post #113
zaroth wrote: post #110

Earlier quoted context omitted.

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!

Patrick, is that you?

I just wanted to say that I admire all that you guys are doing at Stripe. My favorite company currently. Please keep up the standard, even when you do eventually go public.

I feel much better now that I have got that off my chest.

Downvotes in 3..2..1

Re: Stripe Capital

#175

Post by arrosenberg »

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…

You are 100% correct in that. Whenever I consider this type of capital loan for my small business (physical products) the order of operations is always "Am I going to run out of cash or inventory if I don't use this?" before looking at how good the borrowing rate is. If I overpay on the APR, it's probably a good problem; if I don't sell through, then the bank is suffering with me (as you noted).

SBA loans have better rates, but require more work. I particularly like the American Express model, where they extend credit to pay a merchant invoice directly. You repay the credit in 30/60/90 days and you pay 12% (which used to be 9%).

Re: Stripe Capital

#176

Post by meowface »

owens99 wrote: post #150
kryogen1c wrote: post #109

Earlier quoted context omitted.

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 o…

It’s a solid response. Not sure if it’s worth pointing out but you are totally fan boying PC and making his response out to be way more than it is.

Regardless of the particular response or the company, it's good to see transparency and lack of bullshit exec speak from C-levels. It might be more common among tech startups, but plenty of non-tech startup founders do it too.

I wonder if the correlation might be age, since it seems to me that younger people try to avoid bullshit and seek out authenticity (giving or receiving) moreso than older generations, which were embedded in more traditional business models across all industries. (I could be completely wrong about this being related to age or generation, though; totally guessing. Authenticity does seem to be a universally growing trend.)

Re: Stripe Capital

#177

Post by lwhi »

kryogen1c wrote: post #109
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…

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 o…

HN most likely represents a core demographic for the product.

Re: Stripe Capital

#178

Post by meowface »

chirau wrote: post #174
pc wrote: post #113

Earlier quoted context omitted.

Interesting idea!

Patrick, is that you? I just wanted to say that I admire all that you guys are doing at Stripe. My favorite company currently. Please keep up the standard, even when you do eventually go public. I feel much better now that I have got that off my chest. Downvotes in 3..2..1

Please don't mention downvotes in your post. It's like compliment/upvote-baiting.

(I find myself guilty of fanboying over certain musicians and founders sometimes, too, but keep in mind people on the receiving end of it sometimes feel automatically uncomfortable, even if you're saying things they like to hear.)

Re: Stripe Capital

#179

Post by webmaven »

willyg123 wrote: post #99
laurentb wrote: post #78

Earlier 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.

> legally, it is not a "loan". It's a purchase of future receivables.

Interesting. From this perspective, Stripe is actually getting into the factoring business: https://en.wikipedia.org/wiki/Factoring_(finance)

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