Kabbage Grows Consumer Green

Can a diet of Kabbage and Karrots make you grow big and strong? Meet Kabbage, a tech-powered financial company whose culture of lending is horticulture. They were the merchant cash advance company that captured the eBay market back in 2009. They’ve since expanded their audience to traditional brick and mortar businesses and traded merchant cash advances for business lines of credit.

And while Kabbage is indeed booming (or blooming you might say), they’ve lacked a certain luster that other disruptors in the lending industry have managed to sow. OnDeck, a business lender that is reportedly in the process of going public has hogged much of the spotlight in the last two years. And then there’s Lending Club, a consumer lender, that is already working on an IPO date.

So is there any room left for the Kabbage brand to bear fruit?

Cue Karrot (close enough to a fruit?), their new consumer lending arm. It’s a bold move into what their competitors likely consider to be a completely different industry. The rules, regulations, and even the underwriting criteria are markedly different from business lending.

2014 has been the year of regulation chatter, the first time there has really ever been an open dialogue about the government’s role in the merchant cash advance industry. All too often, regulation proponents defer likely jurisdiction to the Consumer Financial Protection Bureau, an agency of the executive branch that oversees consumer financial products. Most industry insiders firmly reject the CFPB oversight notion in merchant cash advance, but at the same time are making noticeable efforts to distinguish themselves from consumer lenders just to make sure.

But Kabbage is going for the green with some orange and reasserting themselves as an industry leader and pioneer. Interviewed by DailyFunder’s Dale Laszig to mark this occasion, we heard firsthand from Rob Frohwein, the company’s Chief Executive Olericulturist, err…Officer: ———————–

The Karrot name reflects the homegrown philosophy of Co-Founder and CEO Rob Frohwein whose vision with his cofounders was to create a positive, approachable company.

“I bought the domain a few years ago, with the idea that we’d find a clever way to use the name,” Frohwein said. “When we came up with the name Kabbage I knew that people would love it or hate it but never forget it.

Creativity is a rarity in finance. If you have a name that’s more approachable and friendly, that message will resonate with customers and be amplified throughout the organization. At last week’s town hall meeting, Kabbage gave out Lucite “Karrot” cubes and t-shirts to all of the employees who helped launch the brand. Since then, I must have seen 60 people wearing Karrot T-Shirts!”

Frohwein described the instant gratification of Karrot’s fully automated online consumer lending platform.

“We’re applying the same kind of super diligent mindset that we apply to our work with business owners. It’s always a stressful time when consumers are looking for capital, whether it’s to consolidate debt or improve their homes. Karrot’s whole process takes minutes from the time that a borrower lands on our site to being approved for cash. Other products take days.

Our existing infrastructure enables us to deliver capital at lower rates and we also have a high NPS score because we take care of the customer.”

Reflecting on Kabbage and Karrot’s unique brand of predictive analytics, Frohwein suggested that the business intelligence used by Kabbage and Karrot to verify income and request appropriate payments are key differentiators for both companies.

“For example, taking payments doesn’t always happen efficiently at other companies,” Frohwein said. “A critical aspect of consumer lending is determining the appropriate amount of a payment to collect so that an account doesn’t become overdrawn. Our intelligence accurately predicts how much of a payment to request via ACH so consumers avoid the cost and headache associated with non-sufficient funds.”

Frohwein said that the charter at Kabbage and Karrot is to provide services and products that small business owners and consumers can value and embrace.

“We still go to customer events to learn about the audience and understand the market. It’s also a great way to generate some traffic and word of mouth.

Small business owners are amazed when we offer to buy them a drink. No SMB owner had ever been treated like that. Part of it was selfish – we wanted to have a drink ourselves.

Approachable, warm and friendly – that’s Karrot.”

Our photographer was unavailable for the interview with Frohwein. Our sketch artist did their best to recapture the moment as pictured above.