[Sean Cash]

Did anyone notice that Kabbage moved into the traditional MCA space 2 weeks ago? They're funding regular old offline small businesses now. Will anyone really be surprised if Amazon does the same thing?

I think it's time to acknowledge that the Internet-based funders are not an industry of their own.
http://www.merchantprocessingresourc...e-competition/

[CO1]

Small Guys move out! The Dream Team is coming! Make way! Now the Strong will survive! Who will it be? Will all the ISOS, BROKERS, SMALL DIRECT FUNDERS LOOK TO THE BIG GUYS FOR ANSWERS; AND DAMN THE BANKS THEY ARE IN US AGAIN! WHO LET THE BANK IN THE FIRST TIME>?

[JayBallentine]

This is just the a ripple... The high tide has yet to rise.

[Finance1]

I suppose there are 2 sides to the equation. Our industry has been seriously lacking the growth it deserves for years. From a financial services standpoint the ENRITRE MCA space is smaller than half the average size of a single hedge fund. To us insiders the MCA/Loan space seems much bigger and more important that it really is to the rest of the business world.

If our industry has the potential to become a 3, 5, or even $10B industry then there is exponentially more room to grow than we think. Amex and Kabbage and the likes help from a growth standpoint. More mainstream acceptance = much larger pool of potential clients.

Then there's the scary side of the equation. Amex, Kabbage, maybe even Google and others are very large, well known, and well capitalized businesses. They will have a competitive advantage in being "found" by a prospect. I suppose it's safe to say that they can grow their book faster than the founding fathers of the industry.

One thing in the Kabbage article that is noteworthy is that they can only do offline businesses who use quickbooks. That's how they underwrite. Pretty smart way of doing it imo but there are about 4 million quickbooks users and many of them aren't fundable by anybody. Also, many businesses that use quickbooks keep awful records. I've seen plenty myself. If I was going to underwrite using quickbooks data I would definitely prefer data coming from an accountant vs a backroom bookkeeper or business owner.

Another thing about large companies coming into the industry is that they have much larger overhead in comparison to small nimble funding companies. Our company can beat any offer than AdvanceMe puts out. It's simple math though. We can be more profitable at a lower return.

The entire move towards large firms entering the space is glass half full or glass half empty depending on how each individual funding company is positioned in the market. Personally, I'm not overly thrilled about Kabbage's move but then again we've been successful acquiring with plenty of large competitors already in place. Time will tell.

[Sean Cash]

I noticed the quickbooks thing too, but like the other newer funders, they are tiptoeing in. They collect data, then expand their box, then collect data, then expand their box. 12 months from now, I'm sure they will be funding merchants regardless of quickbooks. Intuit has a relatively cheap API so all of these "we've partnered with quickbooks" announcements are just companies paying Intuit to tap into their live feed of data.

I thought you wrote a good post Finance1 and you bring up some good points.

A few takeaways from another article I just read about Kabbage are:
"In one year, Kabbage's annualized advances have grown from $15 million to $200 million"
- That would make them about the 3rd largest funder behind CAN and On Deck

"We've learned that if someone has added Facebook or Twitter data" to their Kabbage account, says Gorlin, "they are 20 percent less likely to be delinquent."
- Is anyone evaluating social data to any extent or is it all just bank statements, bank statements, bank statements and a little bit of credit sprinkled on top to all you guys?

"Banks "can't deny a loan based on social-media data" where age, race, religion or similar factors may arise, Fridman says. "That's where they get into regulatory constraints."
- I hadn't thought of that. I guess this is a slippery slope.

Source: http://www.americanbanker.com/magazi...75-1.html?pg=1

[Finance1]

Sean, we look at social media during underwriting but it's a very cloudy picture. I can see how it would be much more important for an online business to be active on twitter/fb but not a brick and mortar in "Hometown America". Hometown America still believes that social media is a face to face conversation and an actual handshake.

For brick and mortar, yelp/urban spoon/google/ ripoff report and many other review sites are much more important than FB/Twitter. At least in my opinion. It's just tough to compare Kabbage's findings to brick and mortar. With brick and mortar the actual store is the facebook page in some ways.

We take online reviews very seriously. Especially when they are showing a notable decline in service, product, and overall condition of the business. I've called neighboring businesses to potential clients when I felt something was "off" or saw unfavorable reviews. You'd be surprised how willing some neighboring business owners are to talk about their neighbors.

Facebook and twitter are fan clubs mostly. They don't really tell the whole story. But I don't doubt Kabbage either. Online only businesses rely on their online rep to make it work. FB and twitter are an important piece of that. Brick and mortar relies on their neighborhood rep to make it work. Getting a good bead on neighborhood rep is an art and fb/twitter can help but relying on them is a mistake imo.

[JayBallentine]

The entire move towards large firms entering the space is glass half full or glass half empty depending on how each individual funding company is positioned in the market. Personally, I'm not overly thrilled about Kabbage's move but then again we've been successful acquiring with plenty of large competitors already in place. Time will tell.

I think you're missing the point.

Large firms should be the least of your concerns. Guys who will come in, use the Yodlee API's and write software so that MCA's can be participated in by any American system should be the primary concern.

The pilgrims are in fact coming.

Get out your good dishes like it's Thanksgiving.

[HeatherF]

http://www.bizjournals.com/bizjourna...ay-and-we.html

Kabbage asking government to provide data for their business "loan".... so now we are asking the government for help to do regression analysis on business owners.

[jbrown]

A wise man once said, "It's all good until it's not." It is fascinating to see what some of these companies are doing and the data sources they are accessing. I'm sure there are relevant nuggets out in the big data universe. It's scary to me as a funder when I hear companies deciding that site inspections are not relevant and decisions will be fully automated below a certain dollar amount. It will be interesting to see what happens in the next economic downturn.

[HeatherF]

"Big data" does seem to be all over the place right now but you are right in it can't be your only means of underwriting.

[Capital Stack]

This is a really good thread. And Jay Columbus is here!

We just finished the Yodlee integration and are testing it as we speak. Have been integrating all the data points into the system for this exact purpose. And we chose not to go with the intuit product although Kabbage is raving about it. Simple reason is they only have access to 4 mm user that have quickbook accounts, yodlee actually connects with 99% of all banks in the US.

Anyway Jbrown you have a very valid point, although execution and depth of platform will be crucial in this process.

Stay tuned folks this biz is getting interesting and gaining serious steam. Will be announcing a revolutionary product very shortly.

DR

[MCAVeteran]

Green Sheet released an article on Kabbage entering brick and mortar space and have an alliance with authorize.net now. They posted on article they have 100,000 clients and growing and want to expand into the ISO Agent space now funding $500-$50,000 and testing deals to $100K.

[Benchmark]

http://www.authorize.net/solutions/m...vices/kabbage/

This is from Authorize.net website:

With Kabbage you can receive up to $50,000 in minutes to grow your business!

As an Authorize.Net customer, you are automatically eligible for Kabbage funds. Do you take PayPal, sell on eBay, Amazon or other marketplaces? Then you may be eligible for even more cash.

Plus, for a limited time, Authorize.Net customers get a free $50 gift card when they qualify for Kabbage cash.

Why Kabbage?

We are instant: Funds are available within seven minutes.
We say Yes: 80% of businesses get approved.
We help you grow: Businesses grow 266% after receiving Kabbage cash.
We are a trusted source: We serve tens of thousands of businesses like yours.
We are a winner of top industry awards: Fast Company, Venture Beat and PYMNTS.com.
We have been featured in: TIME, Forbes, TechCrunch and Entrepreneur.

How Kabbage works

Signing up is fast and simple. Just add your Authorize.Net account information and you are on your way.
Getting cash is instant and is transferred to your PayPal or checking account.
Take cash when you need it and take how much you need. No obligation.

Join over a hundred thousand small businesses that are supported by Kabbage!
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Authorize.Net customers get a $50 gift card when you qualify through links on this page. Get cash now!

[Benchmark]

And here is the Greensheet article:

http://www.greensheet.com/company_pr...=452&ad_id=143

[Capital Stack]

And here is the Greensheet article:

http://www.greensheet.com/company_pr...=452&ad_id=143

Benchmark thanks for adding this its great info.

[Capital Stack]

yodlee photo.jpg

hay yodlee thanks for the mugs and $10 startbucks card

this is a really good thread. And jay columbus is here!

We just finished the yodlee integration and are testing it as we speak. Have been integrating all the data points into the system for this exact purpose. And we chose not to go with the intuit product although kabbage is raving about it. Simple reason is they only have access to 4 mm user that have quickbook accounts, yodlee actually connects with 99% of all banks in the us.

Anyway jbrown you have a very valid point, although execution and depth of platform will be crucial in this process.

Stay tuned folks this biz is getting interesting and gaining serious steam. Will be announcing a revolutionary product very shortly.

Dr

[isaacdstern]

We lost an auto repair deal yesterday when the funder found out that the merchant had already been funded by Kabbage. The sales rep goes to me " who the hell is Kabbage"....clearly they are no longer just funding online business's

[Finance1]

Kabbage has the pockets and connections to efficiently acquire. They will likely become one of the big ones. Right now (from what I understand) they only have a referral program and not an iso channel. My guess is that changes as their appetite grows. It's hard to become really big in this space without an iso channel. Brick and mortar are much tougher to engage than online merchants where they have limited options and basically a sole funder. Fish in a barrel there.

[GoodCustomerService]

Finance1, I couldn't agree more. It was only a matter of time before technology expanded the MCA and small business loan space. Kabbage is just the beginning. Google is next. Prepare for a sub-prime mortgage style rush to hit the space within the next 24 months. Still, no matter how many different funders and programs that come out, the origination side of the business will still be the driving force. As my good buddies in this space, both ISO's and funders, have always said "Funding is easy. Originating is the hard part." Get out your checkbooks boys and start investing in more marketing. Not just to create new business but to build and maintain credibility. Your companies credibility may be the only thing that allows you to stay in the rush. Especially when you are going up against Goliaths like Google.

Speaking of Google, has anyone heard anything else about them joining the market? Articles, blogs, etc.. Only thing I've seen is the investment they made into On Deck.

[CO1]

We were still going to fund a guy with a deal they already had with Kabbage.