Small and Medium Enterprise (SME) lender, Kabbage, has just received a $250 million investment from Japan-based SoftBank. Kabbage provides loans to SMEs based on customized credit reports using a unique combination of data and analytics. It has provided more than $3 billion in funding to over 100,000 small and medium-sized businesses.
Kabbage’s risk model and funding process
Kabbage pulls credit information from a variety of sources including social media profiles, tax filings, and other company details. This method differs drastically from traditional lending methods that base lending almost entirely on strong credit scores.
Kabbage also has an edge on loan processing times, when compared to traditional business lenders. The average Kabbage application takes approximately ten minutes to process. Compare that to the weeks and months traditional lenders can take to reach an investment decision. Traditional lenders also tend to stall on small and medium companies after a credit crunch, but cash flow funding is what feeds small business expansion. Since the company’s inception in 2009, Kabbage has raised more than $500 million in equity funding and continues to grow.
Kabbage seems like a natural fit for SoftBank’s Vision Fund, which focuses on companies immersed in technology. While this investment came straight from SoftBank and not through Vision Fund, the Kabbage business model fits SoftBank’s pattern of previous investments. Kabbage joins Softbank’s diverse investment portfolio including hugely popular team-building platform Slack (valued at more than $5 billion following a $250 million injection from Softbank) and co-working space company WeWork (a $4.4 billion investment).
Kabbage will use the funds to develop key analytics and expand into new — possibly Asian — markets. There are other lenders in the SME space (including Amazon and PayPal), but Kabbage was among the first to use data and analytics to accelerate the credit approval process. Click here to learn more about Kabbage’s credit approval process and company business model.