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AmEx (AXP) New Kabbage Funding to Nurture Small Businesses

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American Express Company AXP recently announced that its fintech subsidiary Kabbage has launched Kabbage Funding for offering lines of credit to small businesses. The move is focused on helping small businesses better manage their cash flows.

The service offering will provide clients with access to credit lines between $1,000 and $150,000. With Kabbage Funding, American Express intends to go beyond providing cards and offer a wide range of tools to manage cash flows for merchants. All these tools, once connected, are tailored to enable clients to borrow funds, make deposits and pay vendors from just one provider.

This move is expected to enable smooth operations and boost efficiency for small businesses. It makes the process of applying for working capital easier and secured. American Express acquired Kabbage last year to boost product offerings for small businesses in the United States.

Merchants in the domestic market can avail this new funding service with no charges for application, origination, annual and monthly maintenances. It adds to AmEx’s broad suite of products that include Kabbage Checking. AXP is also offering Kabbage Payments to the existing clients, which will simplify and fast track the process of accepting card payments. This service is expected to be more widely available next year. Moves like these help AXP to rapidly grow its business in the domestic market and diversify revenue sources.

Yet, competition remains fierce.

Similar moves were made by Amazon.com, Inc. AMZN and The Goldman Sachs Group, Inc. GS in June 2020. Amazon and Goldman Sachs’s partnership was designed to provide credit lines of up to $1 million to clients selling products on the Amazon platform, per CNBC. The deal provided Amazon a new source of revenue, while enabling merchants to get their required capital. The move was also one of a kind for Goldman Sachs, which was expected to benefit from the inexpensive loan processing.

American Express signed the deal to acquire Kabbage in August 2020.

PayPal Holdings, Inc. PYPL, backed by PayPal Working Capital, also has a significant presence in the small business credit line space. It has been lending money to small businesses since 2013. In 2017, PYPL acquired lending firm Swift Financial for around $183 million to expand its business that provides working capital to merchants.

Price Performance & Zacks Rank

American Express’ shares have increased 38.9% in the past year compared with the 21.1% rise of the industry. It currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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