Kabbage Raises Millions to Expand Cash-Advance Service beyond eBay
By Ina Steiner
Kabbage secured $6.65 million to help grow its online cash-advance service for eBay merchants and to expand to additional marketplaces. Kabbage provides eBay sellers working capital for acquiring inventory, hiring seasonal employees and purchasing equipment.
Kabbage works like other merchant cash-advance services in that it purchases the eBay seller's future receivables, providing merchants with funds and a repayment schedule.
The Kabbage technology platform provides an analysis of online merchants' sales and credit history, customer traffic and reviews and prices and inventory compared to competitors. Kabbage uses PayPal's adaptive payments API to help it evaluate the merchant and to quickly provide funds into the merchant's PayPal account. It maintains visibility into the continued operation of its customers through data connections to eBay and other online sources.
Kabbage interest rates depend on the seller's credit history and store performance and is between 6 - 16% on the initial advance amount. Kabbage authenticates the sellers' eBay account, PayPal account, and makes sure those two accounts are tied. The merchant has a 6-month repayment schedule, and can repay early with no penalty.
Founder and Chairman Marc Gorlin said since coming out of beta, its merchant cash-advance approval rate is approximately 55% of the online businesses that are doing sufficient volume. Customers who are approved go from application to cash in their PayPal account in less than ten minutes.
Kabbage has worked with merchants in categories including toys and model trains, Native American jewelry, and a lot of sellers in clothing and shoes, and Gorlin said no merchant has yet defaulted.
Gorlin said Kabbage will use the new funds to market and drive account growth within existing marketplaces and to expand operations into additional marketplaces, such as Amazon.com, Etsy, Overstock.com.
The Series A funding round was led by BlueRun Ventures, with additional investors including: David Bonderman, founder of TPG Capital, Warren Stephens, CEO of Stephens Inc., and the UPS Strategic Enterprise Fund.
About the author:
Ina Steiner is co-founder and Editor of EcommerceBytes and has been reporting on ecommerce since 1999. She's a widely cited authority on marketplace selling and is author of "Turn eBay Data Into Dollars" (McGraw-Hill 2006). Her blog was featured in the book, "Blogging Heroes" (Wiley 2008). Follow her on Twitter at @ecommercebytes and send news tips to firstname.lastname@example.org.
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