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Comment by atourgates | Hacker News Reader

Based on the amount of junkmail I get offering my small business loans, I have a hard time believing the "filling a niche no-one else is offering" narrative.

We get about 2x mailers per week from AMEX alone offering business loans of up to $500k, not to mention the many other offers we get less frequently.

I like Stripe and think the offer a great product, but I don't think they're doing this because no-one else will.

Even this specific type of loan, called a "Merchant Chash Advance" - exists, and isn't anything new: https://www.fundera.com/business-loans/merchant-cash-advance

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[Stripe cofounder.]

> Based on the amount of junkmail I get offering my small business loans, I have a hard time believing the "filling a niche no-one else is offering" narrative.

Leaving aside questions about how good those lenders actually are to work with, it's still a surprisingly inefficient market. Businesses built on Stripe still report that access to capital is one of the _very top_ limiting factors on their growth. The uptake rates we've seen in the Stripe Capital beta over the past year corroborate this.

Our hypothesis is that existing lenders are disproportionately ineffective at detecting and underwriting internet businesses, since they have such different capital and growth dynamics.

>Our hypothesis is that existing lenders are disproportionately ineffective at detecting and underwriting internet businesses

Is that because you have a view into your business customers cash flows, so you think you'll be able to better assess risk than traditional lenders?

Yes, but much of it is simply taking the problem more seriously. In principle, others could build this by leveraging bank account data. (Or by using Stripe Connect.)

We were so struck by the extent of the problem reported by Stripe users, and by how that remained constant over time, that we decided to go tackle it directly.

You should research as much as possible about ONDK, the 800lb gorilla in SMB lending. They're a public company so the data is in their quarterly reports.

Which is exactly why Square got into it as well: https://squareup.com/us/en/capital

Dude, outside of the SV bubble access to capital is always the top for any small business that believes in themselves. Did you "discover" labor is the second biggest?

They are replying to another comment who had questioned the need for yet another loan service. It's fair to point out the persistent problem of access to capital, even if it's obvious to many.

I have taken over a small business (expect to do ~$1.2-1.5m revenue this yr). Getting any sort of credit as a backstop is really really hard. Especially when you need it. This doesn't seem too different in terms of biz model and fees to something like Fundbox (which hooks into your Quickbooks account). Business interest rates tend to be significantly higher than personal rates (my parents have run a business for 20 years, and the interest rates for their commercial business mortgage is 2x the mortgage on their house)

Peter Thiel made an interesting point RE: one structural problem in the US economy being that lenders are giving consumers too much credit, but small businesses not enough.

This does seem to be exactly like PayPal Working Capital, down to the application and fee structure.

I'm guessing that what Stripe is really bringing to the table here, is what they so often do: considerable simplification of annoying, often slow, red-tape-heavy processes.

Their entire existence has been built on that. They look for the burr in the saddle. If PayPal had not been so incompetent with their API, Stripe probably wouldn't have had enough of an angle in the beginning to gain broad traction among developers.

I agree they simplified payments, but I don't see how they improved this product over PayPal. Both decide almost instantly and don't require a bunch of documentation.

Probably hard to improve on that process, but it does look like they are just playing catch up in this small area of their business.

Well, I for one, given PayPal's notoriety, wouldn't touch their offering with a barge pole.

Stripe has a lot of goodwill - that goes a long way.

Shopify, Amazon, Paypal, Alibaba all have similar concepts.

> Based on the amount of junkmail I get offering my small business loans, I have a hard time believing the "filling a niche no-one else is offering" narrative.

if you tried applying for one you would retract that statement and just upvote OP.

silly unexperienced reply

Have you actually tried to qualify though?

From my experience as a consumer and business borrower, it's very easy to borrow money at a crummy interest rate. ZIRP comes no where close to permeating SMB.

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