Kabbage, the fintech start-up that has outperformed many major lenders in the paycheck protection program, is considering a sale, said two people familiar with the situation.
The Atlanta-based company hired FT Partners after receiving expressions of interest, people said. Kabbage could sell for between $ 750 billion and $ 1 billion, one person said.
Possible bidders include financial institutions and technology companies; no private equity investor appeared among the interested parties, one person said. A winning bid is expected within a month.
Kabbage does not comment on rumors or speculation, a spokesperson said.
Kabbage was founded in 2009 by CEO Rob Frohwein; former president Marc Gorlin; and Kathryn Petralia, President, as a means of providing quick financing for small businesses. Executives felt that small businesses were underserved by lenders. Kabbage, through its website and mobile app, provides amounts up to $ 250,000, underwriting and managing loans on behalf of Celtic Bank, a member of the Federal Deposit Insurance Corp.
Kabbage – the name is slang for the money – was one of the first to use big data analytics to determine whether a small business was worthy of credit. The company bought Orchard in 2018 and, in 2019, picked up Radius Intelligence to improve its data capabilities. It has invested over $ 1 billion in technology that has enabled it to automate loan applications.
The company has also developed a full line of financial service offerings for small businesses, including payments, helping customers accept and settle funds faster; analytics or insights, which help clients refine their cash flow and performance forecasts; and verification, which eliminates the usual fees.
Five months ago, in March, Kabbage stopped starting loans for its partnership with Celtic Bank as Covid-19 shut down operations across the United States. The company laid off a significant number of its approximately 600 employees and stopped handling new loans for its small business clients. He continued to serve his existing clients, providing payment acceptance and cash flow analysis.
In April, the Small Business Administration approved several fintechs, including Kabbage, to provide loans for the Paycheck Protection Program. It turned out to be a great location for the business.
Kabbage has partnered with 135 community banks to process more than 270,000 PPP loans worth $ 6.5 billion, a spokesperson said. At 270,000, Kabbage’s volume was almost the same as that of the 274,451 loans recorded by
(ticker: JPM), the largest PPP lender, to July 24. (JPMorgan stopped taking PPP applications in June, while Kabbage is still dealing with new loans).
With the PPP, Kabbage has shown that he can do such a good job to serve small businesses as bigger lenders, if not better. The program has also helped Kabbage to double the number of its customers to nearly half a million, the spokesperson said.
The PPP, however, should be a one-time bump for Kabbage, bankers said. The company currently employs 300 people and has not resumed processing non-PPP loans. He continues to focus on PPP, which is should end on August 8.
Kabbage has raised nearly $ 500 million in equity and over $ 2 billion in debt financing. This includes a $ 250 million investment from SoftBank in 2017 which valued the company at $ 1.2 billion. Kabbage has a large number of investors including Reverence Capital Partners, Thomvest Ventures, Mohr Davidow Ventures, BlueRun Ventures, UPS Strategic Enterprise Fund, ING (ING), Santander InnoVentures, Scotiabank and TCW / Craton.
Another fintech PPP faced a similar situation. On Deck (ONDK), the once-bulky small business lender, also suspended loan grants in April, but continued to serve existing clients with term loans and lines of credit. He participated in the PPP, in partnership with Celtic Bank,
(CUBI), and others to provide loans. He relaunched his loans in June and last week,
(ENVA) has agreed to buy On Deck for $ 90 million.
Kabbage is expected to fetch a much higher price tag as it provides several financial services to small businesses. On Deck is just a lender.
Executives from Reverence, TCW / Craton, UPS and On Deck declined to comment. SoftBank, Thomvest, MDV, BlueRun, ING, Santander and Scotiabank could not be reached.