Kabbage Expands Small-Business Financing

TheStreet.com

NEW YORK (TheStreet) -- Small-business financing outfit Kabbage, which made its mark by focusing exclusively on funding small e-commerce merchants that sell through Amazon , eBay , Yahoo! and Etsy, among others, is expanding its reach to fund both online and offline small businesses.

The company announced a partnership with Intuit to use QuickBooks data to instantly approve and extend funding, it said Tuesday.

It is a significant expansion for the two-year-old Atlanta startup, which has offered approximately $85 million in short-term financing through more than 70,000 advances to e-commerce businesses since its launch in August 2011. In 2013, it plans to make over 100,000 advances.

Earlier this year, the company expanded its funding offering to the U.K.

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More than 4 million small business customers use Intuit's QuickBooks across industries that include retail, manufacturing and service providers.

Merchants funded by Kabbage sell a portion of their anticipated future credit card receivables to Kabbage, and in return can receive as much as $50,000 per six-month period. Businesses pay between 8% and 18% on the advance if they take the full six months to pay back the amount. The percentage is based on a store's monthly revenue, credit quality and time to pay back.

The more platforms businesses sell on, the more incentive Kabbage offers them in the form of funding. Even the amount of social media interaction between businesses and customers can lift advance limits.

"Small businesses need partners that understand their business and can help them save time and money," said Marc Gorlin, co-founder and chairman of Kabbage. "We are incredibly proud to be the first to exclusively use QuickBooks data to make real-time decisions and deliver funding to businesses in minutes. We've been often asked when Kabbage would support the bricks and mortar counterparts to online businesses. That day has arrived. Today's expansion dramatically accelerates Kabbage's vision of democratizing access to capital for all small businesses."

The move, though, puts Kabbage in direct competition with other tech-driven alternative small-business lenders that came on the scene as a result of the disruption of the capital markets following the financial crisis. Even players like eBay's PayPal and Amazon have begun experimenting with lending to merchants on their platforms.

Investors seem to be circling the alternative lending space sniffing out opportunity. Earlier this month, Google took a $125 million stake in Lending Club. Separately Google Ventures participated in a Series D round of financing to On Deck Capital.

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Kabbage also has some heavy hitters backing it, including venture funds like Thomvest Ventures, run by Peter Thomson, director of Thomson Reuters , Mohr Davidow Ventures, BlueRun Ventures and the UPS Strategic Enterprise Fund.

David Bonderman, founder of TPG Capital, is also an investor in Kabbage.

Kabbage announced last month that it completed a $75 million credit facility, led by Victory Park Capital - a new investor - and existing investor Thomvest Ventures.

"Kabbage's underwriting platform and ease of use has positioned it as the leading online provider of credit solutions to small businesses," Peter Thomson said in a statement at the time. "We are pleased to partner with Victory Park in funding the growth of Kabbage and its small business clients through this debt financing and to share in Kabbage's future growth as an existing equity investor."

-- Written by Laurie Kulikowski in New York.

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