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Stripe Capital
- adamqureshi 7y agoStripe offered my 1 man shop a cash advance. $12,500 $1,250 Fixed fee then 10% of sales withheld. $18,500. $1,850 Fixed Fee. 14% of sales withheld. $25,000.00 $2,500 fixed fee. 20% of sales withheld. terms: No lengthy application: You’re pre-qualified for your advance—no time-consuming application process required. No hidden fees: We charge one fixed fee for the advance—there are no interest charges or late fees. Pay when you get paid: Stripe withholds a set percentage of your daily sales until the total amount owed is paid down, so your daily payment adjusts to your performance.
- mNovak 7y agoThe important question here is what are your average monthly sales? (e.g. what is the expected term and thus APR of the loan?)
- deleted 7y ago[deleted]
- ant6n 7y ago"until the total amount owed is paid down"
- i_cant_speel 7y agoI'm confused on why everyone is focusing on this so much. It matters on interest-based loans because a higher APR means you are going to pay more in X amount of time. But here you are paying a flat fee, regardless of the amount of time it takes to repay. Why does the APR matter?
- softawre 7y agoBecause if you have the option of getting the loan through Stripe or a bank that offers a loan with a regular APR, you may want to compare which is a "better deal".
- i_cant_speel 7y agoAh that makes sense.
- kraig 7y agoThe hidden fee is baked into your % of sales withheld, unless you have extremely static income
- adamqureshi 7y agoI did not accept. I think i'll keep grinding without it. :-)
- sleepychu 7y agoSo do you actually get 22500 delivered?
- abalone 7y agoStripe is really coming after Square. Square Capital is an extremely similar product (prequalifies you & autopays based on your payment volume). Square has a platform / payments SDK but if you look at the Github repo it's a disorganized mess versus Stripe's with virtually no "stars".[1] There's also Stripe Terminal which is a platform-y approach to Square's register/terminal. I wonder how much longer until they go after Square's cash app. [1] https://github.com/square https://github.com/square https://github.com/stripe https://github.com/stripe
- TazeTSchnitzel 7y agoKlarna has an identical product here in Europe too.
- halflings 7y agoAnd iZettle (also a Swedish startup, recently acquired by Paypal) has the same service: https://www.izettle.com/gb/advance https://www.izettle.com/gb/advance So nothing new here.
- clint 7y agoAnd Paypal has been doing this (Paypal Working Capital) for about 6 years at this point: https://www.pymnts.com/news/b2b-payments/2018/paypal-uk-working-capital/ https://www.pymnts.com/news/b2b-payments/2018/paypal-uk-work...
- haven 7y agoNot to nitpick, but a quick check shows Square has way more stars overall. (233,343 stars for Square repos and 30,982 stars for Stripe repos.) If you’re talking about Square’s brand new SDKs, they of course start with zero stars and some are just weeks old.
- abalone 7y agoWow, looks like Square is updating its github repository in response to this thread! Just saw they pinned their SDKs. Good job Square, that helps. Square if you're listening, also work on the docs and dev experience. For example I noticed that Stripe's docs immediately show you how to work with charges. Whereas with Square the first step is... setting a location. It's just another little dev experience hurdle. What if I don't have a location? What if I'm an online store that spans all my locations? Stripe has put a lot of attention to detail here. Pinning repos is just the tip of the iceberg. This is important because developer mindshare matters. For instance it seems like lots of devs here think this stripe capital product is novel/brilliant, a testament to wunderkind founders, etc. etc. That's all Stripe doing an A+ job grabbing and holding developer mindshare. GET ON IT SQUARE. P.S. I think my characterization about the SDK stars is correct. They have some other open source projects that are very popular, but their SDK is trailing way behind Stripe by this measure (even years old repos), by like a couple orders of magnitude.
- ralusek 7y agoSo am I understanding this correctly? It is a fixed 10% fee, irrespective of the payment schedule. And then the payment schedule is simply taken as ~12%(increasing as the amount loaned increases) of transactions processed through Stripe until 110% of the loaned amount has been deducted?
- deleted 7y ago[deleted]
- harshadante 7y agoHarsha from the Stripe Capital team here. The loan amounts, repayment rates, and fees shown on the landing page are just used as examples. That being said, the example you walked through is correct: for a loan with a 10% fee and a 12% repayment rate, Stripe will deduct 12% of your Stripe sales until 110% of the loan amount has been repaid.
- onetimemanytime 7y agoso they know your business better than anyone else, making it painless to approve /deny. They also can keep your loan payment directly (on the source, don't send that part to you) Pretty smart.
- marclave 7y agoWow, super cool and they also allow you to provide Stripe Capital through connect to your customers!? Insane.
- jonknee 7y agoHere's a twitter thread from John Collison detailing why they launched this. It sounds pretty innovative (not exactly a surprise considering it's Stripe!). https://twitter.com/collision/status/1169660488374001664 https://twitter.com/collision/status/1169660488374001664 > Since 2008, loans made to small businesses have decreased in absolute terms by 41%. Banks have been pulling back from SMB lending. > When businesses can get a bank loan, they spend an average of 25 hours on paperwork and wait weeks or months for approval. > For internet businesses, capital is vital to growth: for marketing spend, inventory, engineering, and much else. > Stripe users report access to capital as one of the top factors affecting their growth.
- thiscatis 7y agoInnovative? Do a quick google search for POS Lending ;). This is a standard offering for most financial institutions that do merchant acquiring. But I'm sure Stripe will greatly improve the experience.
- jonknee 7y agoYes, a greatly improved experience is exactly Stripe's MO. That is innovative in my book.
- oiasdjfoiasd 7y agoNot really innovative.
- qrazhan 7y agoSquare and PayPal both have similar offerings, which piece here do you feel is innovative? (disclosure: I work at Square, but not on Capital.)
- jonknee 7y agoNo application and approval process?
- deleted 7y ago[deleted]
- rglover 7y agoThis is really great to see. Makes the "should I get a loan for this" question a lot less cumbersome to answer—the repayment via percentage of sales is quite clever.
- Veelox 7y agoThe FAQ button goes to https://stripe.com/docs/capital/faqs https://stripe.com/docs/capital/faqs which currently 404s for me.
- deleted 7y ago[deleted]
- aznpwnzor 7y agoit's smart because they already have cash flow insights and also control your revenue stream. but i wonder how this nets out in terms of: 1. do i want the entity holding my loan to also control my billing/revenue management? 2. aren't smb rates much lower than this usually? so crazy that certain usurious rates are just explicitly allowed
- brianpgordon 7y agoThe rates don't seem extraordinarily high to me. What would you consider reasonable? It's not trivial to get an apples-to-apples comparison since loan rates are usually given as an APR, not a flat fee. Also, don't confuse their "% of sales to loan repayment" number with a rate - that just determines how much of your revenue they hold back until the loan is repaid.
- aznpwnzor 7y agoyea that's technically a subpoint really that they've made this really hard to compare. i'm mainly saying it's possibly unreasonable based on the example case they've illustrated. morally, usury can be one or both of the two: 1. socially deemed over profiting 2. socially deemed high drag on your borrower i'm using a gut check on #2 here
- al2o3cr 7y agoIMO using the effective APR doesn't make a lot of sense in #2, since a business which isn't doing as well will be repaying more slowly and therefore see a lower effective APR...
- harshadante 7y agoHarsha from the Stripe Capital team here. Access to capital has been one of our top user asks, and users were excited about the possibility of Stripe leveraging our knowledge of their business to offer them an integrated solution for their capital needs. As for pricing, the cost of the loan is a single fixed fee that adjusts to the loan amount, and it is paid over the course of the loan—there is no interest rate or additional fees. The effective APR is dependent on how long it takes to repay the loan. We’re priced very favorably compared to alternative lenders.
- paggle 7y agoWhat a fucking amazing company. The biggest challenge in making a loan is getting repaid. When you control the vehicle by which your debtor gets paid by their customers, you can easily and frictionlessly take your repayment without having to make calls and send increasingly agitated letters. Genius
- asdf21 7y agoNot legally, they would still need to have a legal order for garnishment, I assume.
- nroach 7y agoGarnishment is against accounts held by a third party. If the right to withhold or draw from already-authorized sources is part of their contract on either the payments or lending side (and I can't imagine it wouldn't be), no garnishment should be needed as they're in direct contractual privity.
- echelon 7y agoMany companies in the payments and small business space already do this. It's not new. Square, PayPal, etc.
- ericjang 7y agoI've probably missed something, but for how long does the borrower have to pay 9% of their sales? Is the debt paid in full once $15k (+interest?) is paid back? What is that interest rate?
- frakkingcylons 7y agoThere is no interest, you just have to pay back the fixed fee.
- harshadante 7y agoHi there, this is Harsha from the Stripe Capital team. You are correct that the repayment rate (9% in this example) will stop once the loan amount and the fixed fee has been repaid. There are no interest charges or additional fees.
- mark242 7y agoI have the feeling that this will have the same net effect for startups -- or even more -- that Stripe-as-a-payment-gateway also had. This could be an instant accelerator to self-funding.
- bob_theslob646 7y agoThe thing about taking money in the form of debt is if the company gets into trouble, debt holders are the first to get paid and or get a stake in the company. That is why it can be dangerous for startups to take on debt.
- jawns 7y agoThe way Stripe Capital has structured repayment of the loan -- fixed fee, dynamic loan term -- is is an interesting way to make it hard to compare against other lenders, which typical express their fees through APRs. The term of the loan is variable, and depends on daily sales, but assuming you have a high volume of sales and take out a small loan, the effective APR is going to be through the roof! For instance, suppose I take out a $25K loan with a $2.5K fixed fee. Now 15% of my sales go toward repayment. Let's say I pull in a little over $30K in sales a month. The loan will be repaid in about six months, and my effective APR is 20%! Might as well put it on a credit card! You can get a small business loan at FAR better terms elsewhere: https://www.valuepenguin.com/average-small-business-loan-interest-rates https://www.valuepenguin.com/average-small-business-loan-int... So it seems like the main reason you'd go with Stripe Capital is that they've made the whole process practically effortless. But one thing strikes me as odd about this whole arrangement. The better a business performs, the quicker it is able to repay the loan, and the higher its effective APR becomes! It's essentially a prepayment penalty in disguise. So you'd better make sure the loan doesn't help your business too much, or you'll end up getting hosed by the loan fee.
- AdamSC1 7y agoIt seems a bit as though the model is set up for independent operators and 'Mum & Pop' shops that use Stripe but don't have the business acumen to see the issue. Or, people who have a good history of selling with Stripe, but, lack the credit rating, history or collateral to use other lenders. It's a very carefully and cleverly thought out payment model, which leads me to believe they knew exactly which consumer base they were going after.
- dawnerd 7y agoYou nailed it on the last point. It also greatly helps small stores that have highly variable sales. Like with my ebay shop I can go days without selling anything, then have a weekend where I pull a few grand.
- rossdavidh 7y agoWell, the "Mum & Pop" stores you mention, are far more likely to be at risk from taking out a loan that they end up not being able to pay back on time, and late fees and compounding interest make the total cost of the credit far more than they expected. It seems like the total risk here is visible, whereas the worst-case risk of a conventional APR model is difficult for inexperienced users to perceive.
- tempsy 7y agoHow does this compare to Square Capital? IIRC that business has been around for years. Same with Kabbage (SoftBank-backed). Point is, I’m pretty sure SMBs have had a lot of options outside of traditional banks for awhile now.
- edouard-harris 7y agoWhat's most interesting about this is that, reading between the lines, this is effectively an income share agreement for businesses, capped to the loan amount: you pay back a percentage of your revenues until you hit the cap. This could be huge, and Stripe is perfectly positioned to execute on this.
- Liron 7y agoIt's only ISA-like for businesses whose low-profit times are their low-revenue times, like seasonal businesses. But often businesses have a relatively steady stream of revenue and fluctuating/unpredictable net profit/loss (especially if they're dealing with non-software margins), and this model isn't much of a downside-risk-reducer for them.
- edouard-harris 7y agoThat's absolutely correct, though financial technology of this type can also make it easier to start a seasonal business by effectively evening out its cashflows. This won't be hugely impactful for B2B SaaS companies, but it might be a game changer for e-scooters and vacation rental companies, for example - and thereby expand the market for seasonal companies.
- shostack 7y agoSo basically expect to see a lot of costume shops using this come October?
- kentf 7y agoWelcome Stripe :) Let’s keep making access to capital better! (https://clearbanc.com https://clearbanc.com) (https://20mintermsheet.com https://20mintermsheet.com)
- YeahSureWhyNot 7y agoSquare had similar program called Square Capital. I actually didn't make the last 2 paymenta totaling around $2500 and they stopped emailing me after a while. No collections nothing
- johnestar 7y agolol what so you got $2500 for free?
- louisknows 7y agoDoes Stripe offer (or will soon offer) a similar loan program for EU based businesses?
- harshadante 7y agoJust in the US right now. We know the need for capital is global, and we’re working to expand this to EU businesses soon! However, we don’t have a specific timeline at the moment.
- xivzgrev 7y agoThis is genius. Stripe is uniquely positioned to lower risk because they are in middle of payment flow for a lot of digital companies, and they can lower application requirements. I could easily see lots of businesses taking a little higher interest rate for faster / easier capital and without putting up core business assets: it’s all pledged on future income. It’s a win win, bravo.
- thecosas 7y agoBased on some of the other comments on this post, this fills a gap in the payments vertical Strip operates in; it's going to be much simpler for their current users to get capital rather than switching payment providers or getting "outside" capital from a traditional lender, credit card, etc.
- mmanfrin 7y agoI love seeing Stripe announcements primarily because I just love their frontend design. It's just so dang clean.
- anonu 7y agoThis is like a pay day loan. It's a brilliant move by Stripe to monetize their float/net deposits. I wonder what the effective interest rate will be. Edit: I meant "merchant cash advance" Reminds me of this article: How Two Guys Lost God and Found $40 Million https://www.bloomberg.com/news/features/2015-10-06/how-two-guys-lost-god-and-found-40-million https://www.bloomberg.com/news/features/2015-10-06/how-two-g...
- fblp 7y agoShopify capital is similar. The APR can be high, but then you usually can't get loans on that short term. Also seems to be very popular with shopify.
- Meekro 7y agoMy company was auto-enrolled in the Stripe Capital beta some weeks/months ago (not sure when). I never accepted the money. Here's what they offered: $12,500 advance; $1,250 fixed fee; 3.8% of sales towards repayment. $18,500 advance; $1,850 fixed fee; 5.6% of sales towards repayment. $25,000 advance; $2,500 fixed fee; 7.6% of sales towards repayment. My company grossed $45,600 MRR this August. I love Stripe and swear by it, but I don't really understand why someone in my position would want this offer. The highest amount represents only about 17 days of revenue.
- penagwin 7y agoI think you might be on the "high side" of the businesses they're looking to support? 25k seems to be the highest they're offering at all. I'm not really sure what their rates look like for smaller accounts, but I feel like the target audience is one person startups and such, who have some income from their hobby (let's say 1k a month) and want to grow to a full-time job.
- buildawesome 7y agoI'm guessing it's because they are trying to maximize a 12 month window. In lending, the longer the money is out there, the less money you make on it. At 25K, even though they could qualify for more, Stripes assumption is that they are going to pay it back relatively quickly and be able to lend more after that period.
- dwild 7y ago> My company grossed $45,600 MRR this August. I love Stripe and swear by it, but I don't really understand why someone in my position would want this offer. The highest amount represents only about 17 days of revenue. You offer a service I guess (the fact that you say MRR pretty much confirm this already)? This isn't for your kind of business, this is for the one that directly spends theses revenues once they are gained and could profit from economy of scale. Essentially this is for a shop that could save a bit by making bigger order and keeping an inventory. Let say that you make in average 50k, but you spend 90% of that in operating cost... now making the same 25k would takes 5 months, not so good. Now let say that 50% of that cost is in buying the item you sell and that by buying a full month of that item instead of a few day at a time would give you a discount of 20%, that would means that after 2 months you would have paid back that fee and after 6.5 months your sales would all go back to you. A loan could do the same, but even in a bad month, you will still have the same amount to pay back... which can hurt quite a bit a company.
- TazeTSchnitzel 7y agoKlarna, a Swedish competitor in some European markets, has been offering an identical fixed-fee repay-as-you-earn business loan to its customers, and even customers of some other e-commerce firms, for a while now. English press release: https://www.klarna.com/international/press/klarna-launches-boost-to-supercharge-sme-growth/ https://www.klarna.com/international/press/klarna-launches-b... Swedish marketing website: https://www.klarna.com/se/foretag/products/foretagslan/ https://www.klarna.com/se/foretag/products/foretagslan/ (they claim it's available in the UK on that page, but I can't find a UK marketing page for it?)
- crb002 7y agoIf it is automated this could be amazing. A business is a machine for turning money into more money. Being able to hit the gas on demand is a good thing. Especially for SAAS that needs to do $10k of AWS crunching for a client with good credit not on retainer.
- deleted 7y ago[deleted]
- antoinevg 7y agoIt does not please me that this announcement comes at a time when Stripe took an unprecedented FIVE DAYS to transfer incoming payments to my bank account. Is this the new ultra-capitalism? Delay my payments so that I am forced to take on loans on unfavourable terms?
- deleted 7y ago[deleted]
- edwinwee 7y agoAh, sorry. We tried giving you a call earlier. It was a holiday weekend in the US (Labor Day was Monday), and most banks don't process transfers then. It takes 2 business days to send a payout, but these three holiday days pushed it out. If you've any more issues you can email me at edwin@stripe.com.
- perspective1 7y agoWow. This is amazingly innovative and scary. The "flexible" mechanism could unwittingly lead to very high APRs. That they get the money before it gets deposited to your bank account (and used for other expenses or withdrawn prior to bankruptcy) and the application is instant-- wow. In two years or less, Chase and other innovative banks will be hitting Stripe APIs and emulating this. But they will never match the ease exactly and they will never have first dibs on the revenue.
- cm2012 7y agoI worked in SMB finance for four years. Here's the big players: 1) OnDeck (Now a public company) 2) Kabbage 3) Square (For their own customers only) 4) Paypal (For their own customers only) Stripe is obviously following the Square/Paypal model which already own the customer - life is tough for OnDeck and Kabbage since the default rate for standard SMBs is so high and competition is so fierce for them across marketing channels.
- mrnobody_67 7y agoAfterpay and Klara are interesting as well... point of sale. Smile Club rolls their own (65% of customers finance their purchase according to S-1).
- tnolet 7y agoWhen is this launching in the EU?
- countryqt30 7y agoIn the EU you can get credit for 1% and less at any German/UK/French/... bank. Do you really want to pay 10-30% instead at Stripe?
- hobofan 7y agoBanks don't offer a suitable alternative. As a SMB, applying for a loan takes ages in comes with a boatload of paperwork. Same as in the US, where you can probably also can get better terms with a traditional bank.
- rajacombinator 7y agoStripe’s payments platform is missing some pretty basic functionality that they should probably focus on before pursuing these side project ventures.
- edwinwee 7y agoWhat do you think is missing? Would love to chat more to see if we can fix that. :) edwin@stripe.com
- ztratar 7y agoI work at Stripe, too. Please do chat with Edwin! We are building new functionality daily. To achieve global reach for our features, there is still a lot of work to be done. This isn't a place like some of the big tech companies where some folks are working on low-value-add projects. If you want to help build Stripe, too, come apply! https://stripe.com/jobs https://stripe.com/jobs
- ilamont 7y agoI have a small business. As soon as I hit the 5 year mark, the offers for financing started pouring in. Two entities I deal with a lot for online business purposes (including payment processing) hit me up every week. In other words, Stripe is not the only one playing in this market, and traditional banks are not the only option. The repayment approach is interesting, but will it be enough if Stripes' effective rates are too high compared to the competition?
- novaleaf 7y agoI feel that that this is the startup equivalent of racking up credit card debit.
- countryqt30 7y agoI'm a heavy user of Stripe with 3 businesses >50k MRR and for me charging 10% (even if it's 1 year loan), let alone a >25%+ APR is RIDICULOUS. I'd certainly never use it. I mean this as constructive feedback. I'm actually very disappointed by this ridiculously lousy offer for customers, because that's the opposite of how I've known Stripe: friendly and customer-oriented. Cut your fees by 5X and then you have a product we're talking.
- 1123581321 7y agoDo you actually need to finance your business? It just sounds like you don’t value access to cash. This is an alternative to traditional small business lending and receivables factoring.
- H8crilA 7y ago> Eligibility is determined solely based on your history with Stripe. There’s no lengthy application process, and funds typically arrive the next business day. Oh my. Basing credit decisions solely on revenue, not profit, data. Who's here shorting corporate credit, and how? So far the best idea I could come up with is LEAPS puts on $BKLN.
- ejz 7y agoThe guys at Square are probably looking over their shoulders right now...
- tschwimmer 7y agoI am shocked that nobody has mentioned adverse selection here. Stripe presumably has some sophistication that allows them to predict the probability of future cashflows. They're not going to lend to companies that are going to 'default' with crappy future revenue. They'll just choose to lend to the 'winners.' It's an interesting twist, because this makes the terms relative to a standard loan worse: PC mentioned that customers are asking for downside protection, but under the assumption of adverse selection, it's being extended to those that need it least.
- buildawesome 7y agoWould you lend money to someone who you knew was going to lose you money? Stripe is a business too. And offering capital is pretty common among many independent credit card processors.
- noahmakes 7y agoAlways been impressed with Stripe's commitment to users
- NoblePublius 7y agoI know several people in the merchant cash advance business and I wouldn’t trust any of them. This is the lowest rung of finance.
- cavisne 7y agoWhen will they launch Stripe Acquisition - automated acquisition offers based on revenue streams
- ThomPete 7y agoSo its basically like Square Capital.
- bob_theslob646 7y agoSo will stripe be considered a bank?
- stephen82 7y agoMy country (Cyprus) is not yet supported by Stripe. Is Stripe Capital restricted to countries that are not yet supported? How does this work?
- edwinwee 7y agoIt’s only available for businesses that use Stripe in the US (for now). After we look at their histories with Stripe, we send personalized offers to businesses that we think could benefit from Capital. We do want to be available for businesses in Cyprus (Stripe itself and Capital), but we don't have a timeline yet. You can sign up for updates at https://stripe.com/global#CY https://stripe.com/global#CY!
- stephen82 7y agoThank you very much.
- coopeteer 7y agoLooks interesting! Has anyone seen a copy of the agreement yet? I'd be interested to see how they handle things like guarantees / security, and whether or not there's any longstop date at which they would expect you to make a single payment if outstanding amounts remain.