
Today, Stripe launched Stripe Capital, which lends money to internet businesses running on Stripe.
The product: Stripe has been testing a cash advance product with its SMB customers for the past 12 months.
- Access to cash is quick as Stripe doesn't require a lengthy signup process. Funds are generally available the next day. Stripe co-founder John Collison told TechCrunch that Stripe Capital's average loan is in the region of $10,000 to $20,000.
- Lending decisions are algorithmic as Stripe uses business criteria like payment volume, percentage of repeat customers, payment frequency, and changes in revenue growth to determine creditworthiness.
- Repayments come right out of revenues as businesses repay money as they make money. Loan repayment is calculated as a fixed percentage of daily sales. There are no recurring interest charges or late fees.
- Stripe Capital is available both direct to business customers and in certain cases, like for B2B software firms or marketplaces, to the customers of Stripe customers.
A quick case study: Xirsys, a server infrastructure provider for WebRTC applications and services, needed more server capacity to meet the demand of its users.
- Xirsys turned to Stripe to help it expand its global footprint, using Stripe Capital to set up serviers in China, India and Japan.
- Since using Stripe Capital, Xirsys CEO and co-founder Richard Blakely, said his firm's annual revenue has more than doubled.
SMB lending sees a new powerful competitor: Stripe's SMB lending business enters into a market that's been growing rapidly.
- PayPal just surpassed $10 billion in lending to its SMB customers with an MCA and straight loan product. Amazon, Square and Shopify both offer fast-growing MCA for customers on their platforms.
- Kind of competing but not directly: Stripe Capital is designed to provide financing for customers using Stripe's platform. Credit checks are easier this way and the money stays in the ecosystem. So, even though theseleading payment and ecommerce firms are ramping their SMB lending practices, these are incremental loans and don't really compete against one another.