Kabbage raises $250M of equity, largest round to date

The online lending platform Kabbage announced Thursday it has raised $250 million from the Japanese telecom giant SoftBank, marking its largest equity fundraising round to date.

Kabbage expects to engage in “a lot more expansions globally and partnerships with financial institutions around the world,” Kathryn Petralia, the company’s chief operating officer, said in an interview.

The online lender has already raised significant funding from foreign corporations, including a $135 million round led by Dutch bank ING, the venture-capital arm of the Spanish bank Santander, and Canada's Scotiabank in 2015.

Kathryn Petralia, CEO of Kabbage
Executive team of Kabbage, Inc. photographed at The Spires in midtown Atlanta, GA.
Gary Adams

SoftBank had also invested in the firm earlier on, leading a $50 million equity fundraising round in 2014. The Japanese telecom company, a voracious technology investor, has also led a $1 billion investment round into Social Finance, another online lender.

Kabbage plans to invest in various technology services for its customer base, which is made up largely of small businesses.

“There are so many ways that customers can grow their businesses if they have enough tools at hand, not just access to capital,” said Petralia, citing the growth of new electronic services for payments processing and invoice management. “We want to make sure that they have access to the right tools they need."

“This is not anathema to what banks have done historically,” she added. “A lot of the core services that banks have are provided by third parties.”

Asked if Kabbage hoped one day to become more like a provider of core banking services, Petralia said no.

“Those companies are really slow and boring,” she said.

Kabbage sees itself as an alternative to traditional banking services and as a partner to financial institutions, including a number of large banks that have an important stake in the company.

“Eighty percent of our customers bank with the top 10 banks,” Petralia said. “They just can't get a loan from them.”

But, she added, “We do enjoy partnering with institutions because they have a lot of really great assets,” including a low cost of capital, a rich amount of data and a constant flow of funds.

Rather, Kabbage wants to differentiate itself by its flexibility in offering diverse financial products to its small-business customers.

There are 28 million small businesses in the U.S., Petralia said, and, “There should be 28 million products that exactly match that customer or that borrower's need.”

Kabbage currently serves about 100,000 small businesses, she said.

The company, which has raised nearly $500 million in equity to date, is also keeping an eye on the Office of the Comptroller of the Currency’s fintech charter.

“That could be an option,” said Petralia, adding that Kabbage might also be interested in state-level charters if those were offered.

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