With Karrot, Kabbage embarks on consumer lending activities of Lending Club and Prosper – TechCrunch
cabbage, the Atlanta-based startup that raised hundreds of millions of dollars to create and manage an online small business money lending platform turns a new leaf, so to speak: today she is launching a new loan service called Karrot – its first product for consumers, is initially launched in the United States only.
Karrot grew (sorry) from what CEO and co-founder Rob Frohwein describes as a natural opportunity. “When we started targeting small businesses seven years ago, we ended up attracting consumers as well. What we realized was that we refused a third of the people who came to see us, ”he says. He describes this as “a perfect segment” for Kabbage to address.
Karrot Personal Loans will face a number of other players such as Lending Club and Prosper in the online lending space that until now have only been competitors in name, if not in fact.
Karrot will lend consumers up to $ 35,000 with 36- or 60-month repayment terms, at rates starting at 6.44% (for comparison, credit card company rates hover around 21%) . Karrot says he’ll turn loan requests into approvals “in minutes,” with payments coming the next day.
Frohwein says Karrot’s speed is in part due to the fact that it was built on the same platform as Kabbage – an analytics platform powered by big data. For Kabbage’s SME activity, the platform uses and analyzes different data sources such as accounting spreadsheets but also Facebook to determine a company’s repayment capacity and the optimal time.
Karrot is a little different, Frohwein points out, in that he doesn’t tap into as many sources of information – partly because data protection laws prevent it, and partly because the information is less. relevant.
Karrot will be able to verify cash flow and income by syncing with your checking account, which happens in the background while you complete the rest of your application.
Where social media access will come into play is that it will be used as part of the method of verifying a user’s identity (this is similar to the types of services that have been created by companies. of identity management like Trustev).
Frohwein says Kabbage’s decision to add consumer loans was also aided by the partnerships she forged. In its early years, loans were actually cash advances that were unrelated to banking transactions. That changed last year when Kabbage started working with Celtic Bank to provide a bank line of credit. This subsequently enabled the company to view consumers as customers, since “Celtic can provide consumer loans,” he says.
Guggenheim Securities provided Kabbage with a $ 270 million credit facility earlier this year to lend to small businesses – “we’re heavily into that” right now, he said. But Karrot does not come from the same background. There are three others who support him, he said; Kabbage is not yet revealing the names of the credit providers. It doesn’t appear that fundraising has been a challenge for the company so far.
With Karrot now, what’s next for Kabbage?
“Right now we’re focusing on funding, but we’ll be looking at other things,” Frohwein said. He underlines that the degree of competition in the field of credit can be the lever to push it towards other fields. “I like to joke that Girl Scouts are going to launch an online loan service soon.”
More seriously, he thinks it will require other actions, like mergers or acquisitions. “The real magic in this business is figuring out not how to lend money, but how to make sure you get it back,” he says. “At the end of the day, there will be a lot of consolidations of companies that haven’t figured out how to do this.” cabbage