Verizon’s $4.83 billion purchase price for Yahoo includes the former Yahoo Small Business division, which is now called Aabaco Small Business.
Kabbage helps online sellers find capital without going to banks.
Selling underwear online is hardly cheap, says Jeffrey Bernstein, CEO of Chelsea Marketeers, an e-commerce operator that offers men’s and women’s undergarments via LuvMyUndies.com. “You have to have a huge inventory,” he says. “You can have one single style in 60 sizes and five colors.”
That means every time Chelsea introduces a new style, Bernstein will have to spend anywhere from $1,000 to $6,000 to stock up. Raising the money for a relatively small e-retailer such as Chelsea has become more difficult since the recession hit, making cheap credit from a bank harder to find, Bernstein says.
That’s why he’s turned to Kabbage Inc., which launched in October 2010 and has been making cash advances of between $100 and $10,000 to online sellers, typically small and medium-sized merchants that sell on online marketplaces. Merchants use the loans to buy inventory. Kabbage funds operators such as Bernstein as well as others selling through eBay, Amazon and Yahoo. Retailers must pay back loans within six months, with fees determined by merchants’ selling and credit histories, along with customer ratings and income. Fees range from 3% to 7% if paid back within a month, and 10% to 18% if paid back within six months, Kabbage says. Loans average about $8,000 each.
Chelsea has used Kabbage cash advances for roughly a year, and has taken approximately $40,000 in loans and refinancing from Kabbage, Bernstein says. As he established a repayment history with Kabbage, he says, his fees have steadily declined, from a high of about 15% per loan to closer to 10% now. The money, he adds, is vital for his company, whose monthly sales are increasing by some 25%.
Besides having capital to buy underwear and other inventory, Bernstein also says he likes how Kabbage enables him to fill out a loan application online in minutes—Kabbage pegs the typical application approval time at 10 minutes—which he says is less painful than going to a bank for financing. “I don’t have a week to fill out forms and gather papers and such,” he says.
Earlier this month, Kabbage said it had raised $12 million in debt financing from Western Technology Investment, a private investment firm in Silicon Valley. Kabbage says it will use the money to expand its available capital to e-commerce companies. In August, Kabbage raised $17 million in a funding round led by Mohr Davidow Ventures.
Also in December, Kabbage said it had received a U.S. patent for its cash advance and risk assessment system.