Kabbage secures $ 200 million from Credit Suisse to expand its AI-based commercial lending – TechCrunch

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After picking up $ 250 million in Softbank equity earlier this year, the small business finance and loan company cabbage – which only uses algorithms and machine learning (not humans) to determine a candidate’s eligibility – announces another big injection of money. The company is recovering $ 200 million from Credit Suisse in a revolving credit facility that it will use for loans.
Specifically, Kathryn Petralia, chief operating officer and co-founder of the company with Rob Frohwein, said the funding would help the company increase the number of loans it can make to large companies in the United States. The average size of these loans will increase to “north of $ 200,000,” she said.
The money announced today brings Kabbage’s total debt financing to $ 750 million (previous installments from groups like Guggenheim titles), and it is remarkable for several reasons.
As Petralia describes, this is the largest credit facility ever provided by Credit Suisse to a lending platform that makes all of its lending decisions based on algorithms and machine learning. To date, the company has served 125,000 customers and made more than $ 3.5 billion in loans by evaluating a myriad of business-related data points, from accounting details to more lateral information related to its profile on social networks, its location and industry. With some 1.5 million total data points analyzed as part of its decision-making, the claim is that Kabbage’s algorithms are more accurate at finding worthy applicants for a loan and avoiding defaults. S
Second, this is the first credit facility transaction for Kabbage rated by rating agency DBRS, said Kabbage, again notable for the fact that underwriting (valuation) is done through its automated algorithms. “DBRS ratings demonstrate recognition of Kabbage’s ability to recognize, qualify and manage risks in a predictable and responsible manner,” notes the company.
This will be good news for other fintech players looking to disrupt the traditional bank lending market with technology. Others use big data to appraise and underwrite loans, including Kreditech (which focuses on helping create credit scores for the ‘unbanked’ people and is supported by Peter Thiel and Naspers), Fundbox (also with a long list interesting investors including Jeff Bezos) and BlueVine (supported by the Citi group, among others).
Kabbage is currently profitable in its lending business but is still operating at a loss in its platform operation, a newer company launched in 2015 which powers other lending activities alongside Kabbage’s own retail operation. (Customers include Kabbage himself, who has a Karrot consumer credit company; as well as big banks like ING, Santander and Scotiabank.)
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