Tuesday 22 October 2019

Stripe announces it is to start lending money to small businesses

John Collison, left, and Patrick Collison, founders of Stripe Inc. Photo: David Paul Morris/Bloomberg
John Collison, left, and Patrick Collison, founders of Stripe Inc. Photo: David Paul Morris/Bloomberg
Adrian Weckler

Adrian Weckler

Stripe, the online payments firm valued at almost €20bn founded by Limerick brothers Patrick and John Collison, has announced that it is start lending money to small businesses.

The company is to focus on the US market at first, according to John Collison.

"We’re introducing Stripe Capital today," he tweeted. "Loans designed for internet businesses, underwritten by your payments on Stripe. No application necessary, paid back automatically."

Mr Collison said that the company is doing it to address the difficulty that small businesses are having getting bank loans.

"Since 2008, loans made to small businesses have decreased in absolute terms by 41pc," he said.

"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."

He said that the amounts involved will typically be bertween $10,000 and $20,000.

It’s the latest expansion of Stripe’s business model, which started out as a way to help companies who struggled to get merchant accounts accept payments via credit cards online.

The San Francisco based firm, which has a large engineering centre in Dublin employing hundreds of people, can now use some of the data it has amassed from e-commerce through its platform.

"We can constantly be looking at the businesses on Stripe, their cash flow, how they are growing, and who can be productively underwritten for a loan," Mr Collison said.

PayPal and Square also loan small amounts to businesses.

"Lending is fundamentally a business that performs very differently based on where we are in the business cycle," Mr Collison said in additional remarks to Bloomberg.

"We’re doing as much as we can at the current point with models based on data that we can get from business performance and how small businesses performed in the financial crisis.’"

He said that the company plans to be "appropriately cautious."

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