Stripe Launches Merchant Cash Advances with Stripe Capital – Digital Transactions

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On Thursday, major online merchant processor Stripe Inc. introduced Stripe Capital for its US merchants, joining competitors such as Square Inc. and PayPal Holdings Inc. in funding its merchants.

“Stripe Capital makes it easy for internet businesses to get the funds they need, when they need them,” Will Gaybrick, chief product officer of San Francisco-based Stripe, said in a press release. “It’s important to think about financial inclusion not just in terms of consumers, but also in terms of businesses. Businesses, especially small businesses and startups, are the engines of job creation in our economy. It should be quick and easy for them to access the capital they need to smooth their cash flow and invest in their own growth. »

Stripe also said it would extend Stripe Capital to its platform partners such as online store builders and software-as-a-service companies, allowing them to offer financing to their own business customers.

A spokesperson says News on digital transactions the new service does not affect Stripe’s existing fixed-rate lending service for its merchants through the London-based company Funding Circle. This service offers loans of up to $500,000. Advances with the new service are expected to be mostly between $5,000 and $25,000.

Stripe itself will facilitate access to funding and manage Stripe Capital’s service and collections on behalf of its banking partner. This bank, which Stripe declined to name, provides the merchant financing.

Merchants apply for Stripe Capital through their online Stripe dashboard. Stripe makes a credit decision based on the merchant’s payment volume and history with the processor. The company says the funding won’t affect the applicant’s credit score because Stripe won’t check credit reports. Approved applicants will receive three funding offers and funding will be available the next business day after approval.

Stripe refers to funding as a merchant cash advance in which the merchant technically sells a portion of their future sales to Stripe. Advances charge a flat 10% fee, according to three examples posted on Stripe’s website. Stripe takes a fixed percentage of daily sales – in the examples it ranges from 9% to 15% – and applies it to the refund until the advance is paid off.

With the new service, Stripe takes advantage of the unique data it has on its merchants, which competitors such as Square and PayPal have already done this with their own merchant funding services, notes Richard K. Crone, managing director of San Carlos, Calif.-based Crone Consulting LLC. “Stripe literally left money on the table because only they can provide it,” Crone said. News from digital transactions. “Only Stripe can do that for Stripe customers.”

The spokesperson said Stripe serves millions of merchants globally, but declined to give an exact number.

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