Kabbage Gets Social for Online Lending

By Pedro Hernandez | Posted July 10, 2012

When banks aren't lending, where are entrepreneurs to turn? Kabbage, a firm that provides online merchants with cash advances to grow their businesses, is inviting them to point their browsers in its direction.

"Kabbage provides working capital to the millions of small businesses that sell their products online," says Marc Gorlin, chairman and co-founder of Kabbage. To date, Kabbage has advanced -- don't call it loaned – more than $22 million, says Gorlin. And the lines Kabbage extends are substantial, anywhere from $50 up to $40,000. It sounds pretty standard, until he explains how businesses can go about accessing bigger amounts from Kabbage.

Social Klimbing

Today, it's not uncommon for an online retailer to have a Facebook page and Twitter account. Banks may not care, but it matters when it comes to financing from Kabbage.

Gorlin explains that online applicants are encouraged to provide their Facebook pages and Twitter account information to evaluate their customer engagement over social media. The more they're engaged via social networks, the likelier it is that they will qualify for more funds, or in the parlance of the company, a bigger Kabbage Advance.

Why? Gorlin has observed that social media savvy online sellers are "more on top of their business because they're more engaged." It's an incentivizing structure that Kabbage calls "Social Klimbing."

They're also good customers, for the most part. Applicants that append their social media details "are 20 percent less likely to be delinquent," according to Gorlin.

And for a fair number of them, social networks pull double duty as a software staple of modern day sales forces. "Twitter and Facebook are essentially free CRM for some customers," informs Gorlin.

Regardless of how earnestly online sellers engage consumers using social media, it's not the only determining factor in accessing funds from Kabbage. The lender takes several other things into account, such as customer ratings on eBay storefronts, a history of PayPal transactions, shipping statistics from UPS -- a partner and investor -- and good old-fashioned business fundamentals.

There's little point in trying to game the system by using less than savory means to build an army of followers. In the roughly 10 minutes it takes for Kabbage's systems to arrive at a decision and release the funds, it will triangulate through several verified sources.

In short, scammers need not apply.

All Aboard for Online Small Business Financing

In May, Jack Martin quit his job in IT to devote his time to Train Bargains, an online toy train and party supply store. The CCVP and CCNP Wireless certified technologist now has his hands full operating a growing ecommerce site.

Based in Waukesha, Wis., Martin is expanding into the brick-and-mortar realm with a retail location in the neighboring town of Hartland, a drive of about 13 miles. Another site, JM Party Mart, will pick up the slack for out-of-stock items. Currently, party supplies make up the bulk of his business with toy train sales spiking around the holidays.

For the past year, Martin has been using Kabbage to purchase inventory, which in turn has helped drive his business. For him, Kabbage's 10-minute decision process and "the availability of cash right away" are huge time savers.

Martin is also a fan of Kabbage's dedication to usability. "The user interface is very simple," he states. That's high praise from an IT professional who has been subjected to every type of UI, both good and bad, over his career.

The entire experience is so e-tailer friendly that Martin has never bothered even trying to get financing from a bank, he claims.

Pedro Hernandez is a contributor to the IT Business Edge Network, the network for technology professionals. Previously, he served as a managing editor for the Internet.com network of IT-related websites and as the Green IT curator for GigaOM Pro. Follow him on Twitter @ecoINSITE

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