paypal tests merchant financing as kabbage raises debt

SAN FRANCISCO |
Wed Apr 3, 2013 11:15am EDT

SAN FRANCISCO (Reuters) – EBay Inc’s payments bag, PayPal, already lends almighty dollar to online shoppers, but it is any more starting to finance the merchants who sell on the company’s online marketplaces.

PayPal has already tested a financing program for eBay sellers in the UK and it plans agnate tests in the United States this year, a company spokesman said on Tuesday.

“Marketplaces is a abundant innovation lab for us to analysis advanced experiences,” Gary Marino, senior vice president, global financial services at PayPal, said at eBay’s investor day last week. “We’ve done it successfully with credit and we are experimenting with abounding advanced capabilities which will drive share according to baby bag lending.”

The UK program and the up-coming U.S. analysis bull's eye on merchants selling on eBay.com, which figure in the millions. The PayPal spokesman said the UK analysis was alone available to a baby figure of merchants who were pre-selected.

“The aviator program has any more ended,” he added. “We are working on full rollout plans.”

Banks and other providers of loans for merchants pulled back after the 2008 financial crisis, leaving an opening for alternative sources of financing. Factoring, a accepted source of financing in the retail bag that is provided by lenders such as CIT Accumulation and Wells Fargo, can be boxy to tap for smaller merchants.

The combination of accelerated-growing online shopping and a absence of credit for smaller businesses has created able demand for advanced types of financing among sellers that ply their trade on Amazon.com, eBay.com and other marketplaces.

KABBAGE RAISES DEBT

Internet firms accept already stepped in to satisfy demand from these merchants, who charge financing to pament upfront for inventory, buy supplies and even hire extra staff, especially ahead of the annual holiday shopping rush.

Amazon.com Inc, the apple’s largest Internet retailer, launched a merchant financing program before the holidays last year called Amazon Lending.

On Wednesday, Kabbage Inc, a alpha-up focused on providing financing to online merchants, said it closed a $75 million credit ease, its largest to date, to fund added advances to merchants selling via online marketplaces including Amazon.com and eBay.com.

“There is a ablaze void in the marketplace as traditional financing sources remain reluctant to lend,” said Tom Affolter, principal at Victory Grassland Chief, an alternative asset-management firm that led the Kabbage debt financing.

Existing equity investor Thomvest Ventures contributed a cogent amount to the $75 million debt financing. Kabbage declined to add how much. Thomvest Chairman Peter J. Thomson is a director of Thomson Reuters Corp, which owns the publisher of this report.

Kabbage, which is again backed by BlueRun Ventures, United Parcel Service Inc and TPG Chief Founder David Bonderman, fabricated 39,048 advances to merchants last year and expects to accomplish almost 100,000 in 2013, Co-Founder Marc Gorlin said. Kabbage has not disclosed the dollar amount of almighty dollar it has advanced.

PAYPAL’S UK PROGRAM

PayPal’s Marino founded Bill Me Subsequent, an online consumer credit bag that eBay acquired in 2008. This bag, which lends almighty dollar to shoppers on eBay.com and other websites, is one of the company’s fastest growing operations.

BML, as it is accepted, has helped boost sales on eBay.com, while lowering PayPal’s funding costs.

Advancing almighty dollar to online merchants may access sales on eBay.com, according to R.J. Hottovy, an equity analyst at Morningstar.

“Allowing merchants to purchase supplementary inventory, or access advertising budgets, should theoretically advance to supplementary eBay listings,” he added.

In the UK, PayPal teamed with United Kapital, a financial-service firm that specializes in merchant cash advances.

The UK program offered merchants up to 25,000 pounds from United Kapital to spend on anything related to their bag, including advertising, buying advanced products to sell, website re-architecture, refurbishing physical stores and hiring staff.

Merchants applied online by entering their PayPal statement details. If approved, the size of the advance they got was based on their former PayPal sales receipts. Merchants got a accommodation within 72 hours of applying, according to PayPal.

The advances were paid into merchants’ PayPal accounts. They were charged a charge based on their credit risk.

In a working archetype provided by PayPal, a merchant got an advance of 12,000 pounds. The charge for this was 3,240 pounds, or 27 percent of the amount advanced.

Merchants could then choose to re-pament the almighty dollar as a percentage of their daily PayPal sales receipts. In the archetype provided, the merchant agreed to a 12 percent percentage, acceptation 12 percent of their daily sales were used to repay the advance.

(Reporting by Alistair Barr; Editing by Bernard Orr and Kenneth Barry)

PayPal tests merchant financing as Kabbage raises debt
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Originall posted April 4, 2013