Stripe Capital launched, providing small loans to internet companies
- Stripe, the $ 20 billion payment processing startup, is embarking on money lending with Stripe Capital.
- Stripe Capital is a service for Stripe customers, enabling them to receive loans of $ 10,000 to $ 20,000 within one business day.
- The approval is managed algorithmically, using a company’s history on the Stripe platform to assess the activity and risk level of the requester.
- John Collison, president of Stripe, says Stripe Capital is designed to help small internet businesses – which often struggle to get small business loans – get the working capital they need to grow.
- Not only is this a solid new business for Stripe, Collison said, but it also makes the overall platform more attractive – and can help many new and existing Stripe customers grow, which is good for everyone. world.
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Stripe embarks on money lending.
Best known for providing credit card processing services to clients like Warby Parker and Lyft, the $ 20 billion San Francisco Stripe startup has taken another aggressive step into a new market as it pursues its goal. to expand the entire Internet economy.
This time it means small business loans, with the introduction of Stripe Capital.
The company sees it as a smarter way for Internet businesses to get the working capital they need to grow: there is no long demand; funds are paid on the next business day; the repayment is done automatically, as Stripe withholds an agreed amount of the company’s daily income on the service until the loan is repaid.
John Collison, president and co-founder of Stripe, told Business Insider US that the service is intended to fill a gap the company has seen in the market. He says it’s harder than ever for a small business to get a loan – let alone a small internet business, which often doesn’t have real estate or other physical assets to put up as collateral.
Read more: $ 20 Billion Stripe Chairman Explains How Payments Technology Could “Change the Course of the Internet Economy”
Stripe Capital is generally best suited for making loans of $ 10,000 to $ 20,000, Collison said. These loans are guaranteed by a banking partner, although Collison refused to share who that partner might be.
Those amounts aren’t that big, Collison said, but it can make all the difference in the universe for a business that needs to buy more servers or run a crucial marketing campaign to take things to the next level. – a “nitrous boost” which can help a company “take off a little faster”.
Stripe Capital is only open to those who already use Stripe to receive payments. This is important because, as Collison notes, the company uses an applicant’s history on the platform to make a data-driven decision whether or not to approve the loan – the type of data that a bank or another traditional lender might not have access.
âWe’re looking at the corpus of companies running on Stripe,â Collison said, to make quick decisions. While he recognized that algorithms could introduce bias into any equation, he said it was a give and take game. After all, he said, Stripe’s automated approach isn’t prone to the proven biases of any human reviewer, and it can approve more applications, faster.
What Stripe gets
For Stripe herself, Collison said there are three main ways the company can benefit from entering this new line of business.
First, Collison said, is the interest paid on the loans themselves. Other companies like Square and Intuit have carved out lucrative niches in the money lending industry, although Stripe’s focus on internet business helps set Stripe Capital apart, Collison said.
Second, there’s the fact that it makes Stripe itself a lot more attractive as a vendor, Collison said. Stripe already offers its customers the Stripe Radar fraud detection tool and benefits such as chargeback protection. Adding quick and easy access to capital is just one more reason small businesses should choose Stripe, Collison said.
âWe think this makes Stripe’s overall proposition more compelling,â he said.
And finally, Collison said, there’s the connection to Stripe’s oft-repeated mission to grow the Internet’s GDP. Access to capital is a limiting factor for all kinds of online businesses, and the more Stripe can do to ease that burden, the better, Collison said. In doing so, it should increase both the number and scale of Stripe’s potential customers, he said.
âWe think Stripe will do very well eventually when we complete this assignment,â said Collison.