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The Small vs Large Business Economy: Interview With Kabbage

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ValueWalk’s Q&A session with Laura Goldberg, the Chief Revenue Officer for Kabbage. In this interview, Laura discusses her and her company’s background, how Kabbage differs from traditional banks, trends regarding small business and recessions, small business loans, if business owners are prepared for an economic crash, and small versus large business economy.

Can you tell us about your background?

I began my financial services career at Credit Suisse and have since served in a number of executive positions with large brands. I ran product for ScoreBig, an ecommerce site for live event ticketing; oversaw all digital properties and revenue growth for the NFL Online; and built one of the first digital-music subscription services at pressplay, a Universal Music Group-Sony Music joint venture. That led to my role as chief operating officer at Napster where I launched its first subscription music platform and expanded the business internationally. Before joining Kabbage, I was the chief marketing officer at LegalZoom, where I led its marketing team to make legal services more accessible to small businesses and families.

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What about your company?

Kabbage is a data and technology company offering automated cash flow solutions to small businesses, including providing them flexible access to working capital in minutes. Kabbage provides small businesses access to lines of credit up to $250,000 by analyzing their real-time business data. There are no fees to apply or maintain the line of credit, and once approved, customers can borrow the exact amount they need, when they need, without ever having to reapply. Today, we have more than 185,000 customers who have accessed over $7 billion through Kabbage.

How is that different than traditional banks?

From the beginning, we wanted to provide entrepreneurs a better experience than what traditional banks offer. Instead of lots of paperwork and waiting weeks or months for an approval, Kabbage gives customers the opportunity to access a line of credit in 10 minutes or less. We have more than 2 million live data connections with our customers, enabling us to re-underwrite customers daily and dynamically adjust the lines of credit to match their financing needs during their busy seasons. With our focus on automation, Kabbage serves as many as 1,500 small businesses daily, and on average our customers access more than 4 loans every year.

How you differ from sites like creditkarma and fundomate?

Kabbage is one of the largest online lending platforms for U.S. small businesses. We are uniquely positioned in the market due to our deeply-set relationships and ongoing data connections with more than 185,000 U.S. customers, which allows us to provide the right product, for the right business at the right time. We also plan to expand our solutions to provide businesses more tools and insights to manage their cash flow and give them the financial insights, opportunities and advantages that have historically been reserved for big business.

What is the definition of a small business?

What a small business was yesterday is not what it is today or what it will be tomorrow thanks to technology. AI’s impact on the workplace, the gig-economy and other technological advances are changing how businesses are developed and operate. The SBA’s definition of a small business is one that has fewer than 500 employees, but 83% of our customers have fewer than 10. We serve Main Street American businesses—like your laundromats, dentists, general contractors, retailers, hair salons and restaurants—who have historically been underserved or have had difficulty accessing capital from their local banks.

What is the biggest challenge for American small businesses right now?

Data from a recent Kabbage survey of more than 500 small business owners shows cash flow issues top the list of challenges affecting workload, personal life and take-home pay for entrepreneurs. Of the 500 surveyed, 63 percent said they are regularly stressed or have anxiety due to cash flow concerns, and 91 percent noted they spend as many as 20 hours per week on cash flow management, from handling payroll to invoicing and purchasing inventory.

We hear that funding is a huge issue for small business, on the other hand we personally refuse tons of offers - curious what your thoughts are on small business loan environment?

All too often, small business owners submit large amounts of paperwork and then wait weeks or months to discover they are not eligible for a loan. Today the scene has changed considerably. Although some small businesses still may find it challenging to obtain funding, solutions like Kabbage are simplifying that process. As more solutions become available, we encourage small business owners to have a clear understanding of the terms of small business financing so they know what’s best for their business. Kabbage co-created the SMARTBox, a disclosure solution that allows small business owners to easily understand the terms of a loan, including everything from the APR to the Total Cost of Capital (TCC), which provides the pennies-on-the-dollar amount required to repay a loan. It allows small businesses to more efficiently and effectively cross compare options between banks and online lending solutions to know what’s best for them.

That also seems to be the trend with high profile fundraises among unicorns and IPOs - thoughts?

All businesses must evaluate what’s best for them, whether it be taking a loan, raising equity funding, or going public, there’s a time and place where each is highly valuable for the growth of a company. Timing, planning and due diligence are everything.

What are the nationwide trends regarding small business and recessions?

Kabbage recently conducted a survey to understand how prepared small business owners are for a recession. It revealed that most (80 percent) feel their business is prepared for a potential economic downturn.  Many noted they plan to pursue actions to increase cash flow, instead of restricting it, such as:

  • Growing their customer base, securing more contracts or expanding sales. (33 percent)
  • Launching new products or services in an effort to increase revenue. (21 percent)
  • Pursuing business partnerships to sell to a wider customer base. (13 percent)

You say 80% of small businesses are prepared for one - is that normally the case? Was it before 2008?

Small business owners are a confident bunch. They have to be, otherwise they likely wouldn’t take the leap to start their own company. With that said, a number of the small businesses from the survey lived through the downturn in 2008 and know what’s required to ensure their business is well positioned to thrive in the event of another economic event.

Can you tell us how business can prepare for a downturn?

The data illustrated the fact that all businesses are different. For example, some respondents said that they see an increase in business during economic downturns, so it’s relative to the company. As a precautionary step, business owners should have a firm understanding of the cash flow required to sustain their business and identify costs they can reduce if needed.

I would think trends would vary across small businesses from industry - ie a small bank is going to do different things than a small manufacturer to prepare - what are your thoughts on that? Is a small bank more akin to a big bank than it is to a small family owned grocery store?

There will always be differences across companies. Small businesses are so unique that sweeping generalizations tend to always be inaccurate. Every business owner needs to evaluate the cash coming in, cash going out and what’s in savings to make a wise decision about how they need to prepare.

Forget recession, how is the small business economy right now?

This has been a historic bull market, and small businesses have benefited. We have more than 2 million live data connections with customers which indicate their real-time business performance. With more than 185,000 small business customers, we do not see signs of a weakening small business economy.

Does it differ from the large business economy?

A major difference between small and large businesses is large businesses have public markets that show economic performance! There have been dips and climbs in the market recently, but overall the economy is strong for US business.

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