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The financial services industry has seen developments of new and promising technology for over a decade. Many financial companies, lenders, and banks are changing the way they lend money, allowing consumers better access to credit with an emphasis on alternative data and underwriting as well as faster, more accurate decisions.
The consumer lending space isn’t the only industry seeing changes. Various companies in the small business lending and working capital space have revolutionized the way businesses access capital. In fact, Kabbage, Inc. is one of the first companies to pioneer a platform utilizing financial services data and technology to offer fast and flexible funding for businesses.
The Head of Lending at Kabbage, Rob Rosenblatt, offered some of his time to answer questions about how Kabbage helps small businesses in need of funding. Below are some questions and answers about how he transitioned into his role, how Kabbage is setting itself apart from other lending companies, and what to expect moving forward.
In this Q&A:
- Transitioning to Head of Lending at Kabbage
- Small Business Lending and Access to Capital
- How Kabbage Helps Solve Cash Flow Problems
- The Future for Small Businesses and Fintech Lending
Transitioning to Head of Lending at Kabbage
Q: What was the most exciting aspect of taking on the role of Head of Lending at Kabbage?
A: Before joining Kabbage, I did my homework. Having spent almost my entire career in the consumer credit space, I was already aware of the difficulty consumers, as well as small businesses, encounter when they lack traditional, FICO-based credit histories.
Once I understood Kabbage’s business model—and learned firsthand of the founders’ commitment to empower small businesses by using alternative data to provide them access to working capital – the decision was easy.
Q: What stuck out to you the most about Kabbage when considering the position of Head of Lending?
A: What struck me the most was Kabbage’s unwavering commitment to enable small businesses by giving them access to credit – but ultimately, its commitment to give small business back their most precious commodity: Time.
Small Business Lending and Access to Capital
Q: What are some key challenges that businesses face when trying to secure a business loan from a traditional lender?
A: Small businesses are the lifeblood of the U.S. economy. Unfortunately, today the banks are not set up to provide businesses with the credit they deserve. The problem is that small businesses don’t fit a cookie-cutter credit model. As well, loan amounts are typically below the threshold that makes it worth it for the banks to cater to this marketplace. So small businesses are often left out in the cold. With Kabbage, not anymore.
Q: How can these challenges hamper a business that’s in need of a loan to cover short-term emergencies, such as cash flow shortages?
A: Small business owners are resourceful. They’ll do whatever it takes to survive and prosper. This includes using personal funds, maxing out personal credit cards, tapping into friends and family, and even going without a paycheck when required.
But in the end, what small businesses need most is flexible, fast access to capital – capital that is there when they need it, and capital that can support them for the tougher days. Kabbage provides access to lines of credit up to $250,000 to small businesses, so we are the ideal solution for businesses that need flexible funding. And we can approve a business for a Kabbage line of credit in as little as 10 minutes.
Q: How does Kabbage innovate to better serve businesses seeking capital? How does this differ from traditional lending practices?
A: Most traditional lenders place an inordinate amount of emphasis on the business owner’s personal credit. In contrast, Kabbage leverages a customer’s real-time data to make a funding decision. We use these data connections and our advanced analytical capabilities to analyze and understand the truest picture of a small business’ health.
This enables Kabbage to offer credit when banks can’t. There are no fees to maintain a Kabbage line of credit, nor is there any obligation to use the line. Businesses can access capital online or on their phone 24/7 without ever stepping into a bank.
Q: How does the Kabbage Platform tailor loan options for businesses who experience cash flow shortages?
A: We have 2 million live data connections with our customers, allowing us to dynamically adjust lines of credit for our customers based on their real-time business performance.
That means a construction company in the summer, for example, can get an increase in capital when they need it the most. Because we see their live business data we can employ predictive analytics to see where they’ll be and anticipate a need for greater cash flow perhaps even before the business owner realizes it.
How Kabbage Helps Solve Cash Flow Problems
Q: What are some common causes of cash flow issues in business finance?
A: Some of the top use cases entail using Kabbage funds for payroll, inventory costs, marketing costs, rent, and other operational costs. Also, for many small businesses, Kabbage enables them to balance their ‘cash in’ and ‘cash out,’ a simple but perplexing problem.
Businesses have to wait to be paid by their customers, all while managing their own business expenses. Kabbage provides businesses the peace of mind that comes with knowing they have access to capital when they need it, especially when cash flow gets tight.
Q: Do certain companies experience cash flow issues more often compared to others?
A: It’s not a matter of more or less, but a matter of how and when. Every company encounters cash flow challenges at some point. Cash flow needs tend to be especially top of mind when businesses are considering new investments or expansions—be it for a new location, hiring employees or developing new products. Then of course there are the times no business owner can plan for, such as a market downturn, a heavy storm, or economic triggers like a government shutdown.
Q: How often does Kabbage help businesses address cash flow issues? What proportion of these applicants in need of cash flow help are in the startup phase?
A: Effectively, every dollar accessed via Kabbage supports the business’s cash flow in some way or another. All Kabbage customers must be in business for at least one year before they can apply to access funding.
Once a customer, we maintain an ongoing relationship with those businesses that’s rooted in the 2 million live data connections we have with our customer base.
As a result, our customers access on average 18 loans over five years, and as an automated platform, we’re able to serve as many as 1,400 customers daily, accessing $10 million each day.
The Future for Small Businesses and Fintech Lending
Q: In your opinion, what’s the next big innovation in fintech lending to look out for?
A: Harvard Professor Karen Mills recently wrote a book in which she describes a platform that will serve small businesses in a highly personalized, intelligent way, giving them the financial prowess and capabilities typically reserved for large enterprises.
That is the future of this industry, and we’re excited to have a head start in building towards it as we’ve never ceased our focus on data connectivity with customers, even when it may have seemed an unpopular approach.
Q: Has Kabbage considered applying blockchain technology in its lending platform?
A: Blockchain has the potential for some interesting applications in the small business space. But right now, we’re not deploying blockchain.
About Kabbage Inc.
Kabbage Inc. is a financial services data and technology platform helping small businesses access funding and manage their cash flow. The platform utilizes accounting, sales, and other alternative data sources to expedite and improve funding to businesses in the United States and United Kingdom.
Learn more with our Kabbage Business Loans Review.
About Rob Rosenblatt
Rob Rosenblatt is the Head of Lending at Kabbage, Inc. bringing in decades of leadership experience in the consumer credit space with companies such as American Express, Citi Cards, JP Morgan Chase, UniRush, Flywire, and more.
Author: Andrew Rombach