Kabbage, an online lender to small businesses, is now providing point-of-sale loans to small businesses that buy things on Alibaba's online shopping site, the two companies announced Monday.
Under the program, which is called Pay Later, small-business owners can get credit lines of up to $150,000 for their orders on the site.
The deal is noteworthy because Alibaba, the giant Amazon-like retailer of China, is closely watched in the U.S. The traditional banking world sees Alibaba's forays into banking and payments as a threat, just as it does Amazon.
The deal is significant for Kabbage as well. Alibaba says it has “millions” of U.S. small business buyers that purchase from its site. If only a small fraction of those take advantage of the new credit, it will step up loan volume for the lender. This is also the first time Kabbage is offering point-of-sale credit, the product category Affirm created and made popular by letting people buy sofas, TVs and such with instant online credit.
Kabbage, which is based in Atlanta, uses its usual underwriting software, which analyzes real-time business data, bank account data, accounting software data, and payment information to approve or decline each Pay Later application. It renders the decision within minutes, the company says, and the potential borrower never leaves the Alibaba.com site.
Each purchase financed through Pay Later will create a six-month term loan with rates starting at 1.25% a month. According to the two companies, there will be no fees.
“Financing at the point of sale requires a fully automated solution that can handle the immense volume of daily transactions that occur on Alibaba.com,” Kabbage CEO Rob Frohwein said in a press release. “We are incredibly impressed with the service and value that Alibaba.com delivers to American businesses and want to do all we can to support their important mission. The collaboration with Alibaba.com has already delivered millions of dollars of purchasing opportunity to U.S. small businesses and showcases the adaptability of our technology.”
Pay Later beta launched in June 2018. In a survey of 1,000 small-business users of the program, 81% said it is easier to apply with Pay Later than other business financing options, and 68% said Pay Later has allowed them to increase order sizes on the site. The program also accommodates the around-the-clock nature of small-business owners: More than 60% of loans have been accessed outside of normal banking hours of 8 a.m. to 4 p.m.
Kabbage works with large banks, including ING and Santander, in Europe. All Kabbage U.S.-based loans are issued by Celtic Bank, a Utah-chartered industrial bank. Kabbage is funded and backed by SoftBank Vision Fund, BlueRun Ventures, Mohr Davidow Ventures and others.
