FinTech News

FinTech Giant Stripe Launches Stripe Capital

For years Stripe has been one of the largest names in FinTech. With a valuation of $22.5 billion, the payments company is more than a unicorn — it’s a behemoth. However that doesn’t mean it’s done growing yet. This week the company announced it was expanding into small business lending with the launch of Stripe Capital.

One of the biggest benefits Stripe is pushing with the lending options is speed. Not only do they tout a simple application process but also note that approved funds will reach businesses accounts the following day. In terms of payments, loans are repaid by Stripe taking a fixed percentage of a customer’s daily sales. As a result there are no recurring interest charges or late fees (although there is a flat fixed fee for each loan). The percentage of sales withheld varies on the size of the loan, ranging from 9% for a $15,000 loan to 15% for a $25,000 loan.

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

Stripe’s model of tying lending into transactions is somewhat similar to another FinTech: Square. Like Stripe Capital, Square Capital also allows business customers to access capital for a flat fee and repay their loan through daily sales percentages. The program has proven successful for the company, lending over $5 billion to more than 275,000 merchants.

According to TechCrunch Stripe’s lending product has actually been in the works for nearly a year. Furthermore they report that this is expected to be the first big push the company makes into offering other financial services. For example they note that the Stripe is set to launch a business credit card of their own.

All things considered, Stripe Capital seems like a natural extension for the massive FinTech. It also speaks to a growing trend in the space, both in terms of diversification as well as focusing on small businesses. With many other offerings reportedly in the works, it likely won’t be long before that $22.5 billion valuation for Stripe balloons even higher.