The online small-business lender Kabbage confirmed Thursday it has agreed to acquire Orchard, a provider of data, technology and analytics to the online lending industry.
Kathryn Petralia, president and co-founder of Kabbage, said the acquisition will help the company diversify its business and offer more data-driven services to small businesses and financial institutions. It currently works with ING, Santander and Scotia Bank. Kabbage’s U.S.-based loans are issued by Celtic Bank in Salt Lake City.
“There are three core things our [small business] customers care about: having access to capital, managing their day-to-day capital, accepting and making payments,” Petralia said in an interview. “Our goal is to expand on the products and services we offer to allow us to do all of that in one place and allow them to focus on growing their business, not on managing cash flow.”
This could lead to offering small businesses new payment processing and payment acceptance products and services, she said.
Orchard’s team of more than 20 data scientists and engineers create visualization, augmentation and predictive modeling software. They will now be tasked with creating payment-related solutions for Kabbage’s small-business customers, managing transaction data to generate advice and help to small businesses, strengthening Kabbage’s automated underwriting platform and giving bank partners insights into the loan portfolios in which they invest.
Kabbage, which did not disclose the price of the deal, was a customer of Orchard before making the deal and already uses its software to manage assets. “We securitize our receivables and we pledge assets to various facilities we use, and their technology lets us do that more efficiently,” Petralia said. “As we continue to grow and build more products and services, that will be more important.”
Matt Burton, CEO and founder of Orchard, expressed enthusiasm for the deal. “We’ve worked with Kabbage for a long time and know firsthand their focus on data and analytics,” he said. “We have the same drive, and I’m excited for what we can build together. It is a great match."
The Orchard name will not survive. “At closing we will be Kabbage,” Burton said. “I’m sure there’s a good farming pun in there.”
More than 20 Orchard employees, who are all based in New York, would move into Kabbage’s New York office. Kabbage, which is based in Atlanta, currently has eight employees in New York.
Until now, Orchard has been providing loan and portfolio analysis to other online lenders. This business model will be discontinued and those relationships will most likely end. Orchard's current clients are being told about its sale to Kabbage, Burton said.
Petralia said she sees Kabbage’s partner banks making more use of Orchard’s technology. The banks could use Orchard’s platform to obtain a better understanding of the loan portfolios they fund and buy through Kabbage, using reporting and analysis Orchard generates.
“That level of analysis [banks will] be able to get out of it — that’s why I think our bank partners will be excited about this,” Petralia said.