More home-based businesses involved in online selling are getting cash advance loans for their businesses.
Kabbage Inc. reports paying out more than $200 million in annualized cash advances to more than 100,000 small business customers so far in 2013.
The company says the advances represent a substantial increase over the estimated $15 million in annualized cash advances paid out a year ago.
Kabbage is a financing company specializing particularly in loans to small online merchants working from home offices that sell goods on Amazon and eBay. Eighty-two percent of Kabbage customers use money from Kabbage to buy inventory, for example.
Last month, the U.S. Small Business Administration reported an increase in small business lending for the first time in 10 quarters. Overall, the SBA report found small business lending had increased by four-tenths (0.4) of a percent, from $584.1 billion in September last year to $586 billion by the end of 2012.
The SBA report noted an increase of loans in several categories including under $1 million, between $100,000 and $1 million, and under $100,000 in the final quarter of last year. However, the Kabbage Inc. report suggested some loan sizes are still underrepresented.
According to Kabbage’s latest lending numbers , the company’s advances have grown by 298% from 2012 to 2013, while SBA loans under $150,000 have decreased by 8% in that time. (See graphic above showing year-over-year growth,)
Because Kabbage mainly funds home office businesses, particularly those that sell goods on sites like eBay and Amazon, their numbers aren’t necessarily indicative of growth in small business lending as a whole.
The company is also just a few years old, so the increase in lending could be more indicative of its own growth and access to funding than of general economic factors. For instance, Kabbage just closed on a $75 million financing from Victory Park Capital and Thomvest Ventures. This represents the company’s largest funding transaction to date.
Hi Annie,
With a lot lower overhead, home businesses are on the rise. Being able to gain financing for these ventures is an important step. Thanks to Shawn Hessinger for sharing this with the BizSugar community.
Thanks for the info.
It’s nice to see that home-based businesses can get loans, too.
Hopefully, we’ll see more of this…and maybe we’ll even see some of the major banks get in on this trend in the future.
The Franchise King®
I agree with Joel, it is great to hear about small businesses and home based businesses securing the finance they need for growth.
Mel
Anne- GREAT topic to write about, thank you! Also awesome to hear something optimistic for small business owners versus another “sky is falling” article. I’ll check Kabbage out… maybe add it to my list.lies.
With a lot lower overhead, home businesses are on the rise. Being able to gain financing for these ventures is an important step.
Thanks for the article, Annie.
What caught my eye was the increase from $15M to $200M. I love that more people are getting involved in their own businesses. Maybe there is hope for us after all!
This is great news! I am so glad to hear that home based businesses are being taken more seriously. In the past, people with great ideas were often left without a means to bring their ideas to fruition due to lack of capital.
I had never heard of Kabbage, Inc. This is a great resource! Thanks so much for sharing.
I applaud the fact that more publicity is given to other avenues of financing available. The consensus has been that home based businesses fail at a higher rate (so they were denied financing), but thanks to technology, you don’t need to set up a brick and mortar operation to be successful. A few home based businesses in some industries are still going to find it challenging to obtain financing, or they may not qualify for as much. At this point, something is better than nothing at all. Traditional banks typically don’t favor such setups, but with alternative financing more is getting accomplished
This is a great article! We need more people talking about this under-served market. Cash advances aren’t the only game in town when it comes to lending to home-based businesses. In fact, home-based businesses can get a real loan that actually builds business credit. Small business owners should also know that cash advances are much more expensive the a “true” small business loan. I work with a company that has provided real credit building loans to home-based businesses.