Stripe Capital is US payments giant Stripe's lending debut, having identified a need for better funding options for small businesses and start-ups

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Stripe founders, brothers Patrick and John Collison (Credit: Stripe)

US payments firm Stripe has taken its first steps into lending with the launch of Stripe Capital – its new product aimed at improving access to finance for internet businesses.

The facility is available to companies running Stripe’s technology in the US, as well as businesses connected to its Stripe Connect technology platform.

Emphasis has been placed on helping start-ups and small business with liquidity and growth capital requirements, while ensuring the loan system is designed around a company’s prior and future activity through Stripe.

The company provides a payments infrastructure for online businesses and includes the likes of Amazon, Google, Microsoft and Salesforce among its more high-profile customers.

Stripe 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.

“Businesses, especially small businesses and start-ups, 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 Capital aims to solves funding challenges faced by small businesses

Access to capital has been identified by Stripe as a crucial challenge facing small businesses in the modern, internet-based economy.

It cites US Chamber of Commerce figures showing that lending to such firms in the country has almost halved in the past decade, adding that 70% of US businesses say they are unable to get the level of funding needed to grow their operations.

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The Stripe HQ in San Francisco (Credit: Stripe)

For those who are able to reach such funds, lengthy and complicated application processes become a secondary barrier preventing the money from being available swiftly.

Jordan McKee, research director at 451 Research, said: “Traditional funding sources have not adapted well to the internet or the new business models it has enabled.

“Stripe Capital is designed for modern internet businesses seeking help with their cash flow who need quickly accessible and easy-to-manage funding.

“With Stripe Capital, Stripe has removed significant complexity that previously barred many smaller companies and start-ups from access to the funds they need to grow.”


Stripe Capital uses data and technology to enhance the lending process

Stripe says funds approved through its own lending facility will typically be deposited into a customer’s account the next day, while application eligibility will be determined according to a firm’s history using the Stripe platform.

It adds that “advanced algorithms” will be used to “analyse hundreds of relevant signals for each business, including payment volume, percentage of repeat customers, payment frequency, and changes in revenue growth”.

Repayments are fixed to the income generated by daily sales, so “businesses repay money as they make money”.

McKee added: “The platform use case represents a powerful distribution model for small business lending built entirely for the internet commerce era.

“It allows capital to travel across an extensive network to reach a huge long tail of small businesses that have been starved of funds.”