EDC’s Kim Gerhardt met with Rob Frohwein, CEO and Co-Founder of Kabbage. Kabbage is a data and technology platform that enables real-time lending. Launched in 2008, Kabbage has since expanded to serve all small businesses throughout the U.S., providing billions of dollars to more than 100,000 customers.

 

What in your opinion are the key trends in the lending space?

We’ll begin to see more personalized customer experiences and products, as well as banks increasingly adopting cost-efficient technologies to automate SMB lending. Automation, machine learning, and new ways of applying analytics for risk assessment will continue to evolve, too. I also expect more consolidation as the space matures, with all strategies pointing towards improving the experience or acquiring data.

Why is your core focus on small business lending?  What financing pain-points have small businesses historically faced that are now being better addressed by lenders with a more robust use of data?

There are 28 million small businesses in the US. Yet, while more than 40% of those small businesses will seek funding every year, 43% won’t get it. This is primarily due to costs. A bank’s cost to analyze, underwrite and issue a $5 thousand loan or a $5 million loan is the same. This cost-to-profit imbalance is why small businesses have historically been underserved, making acquiring capital difficult and in many cases, unattainable. With the rise of APIs and automation my co-founders and I saw the market opportunity to flip the traditional process on its head. Today, in three easy steps and in seven minutes, small business owners can apply, qualify and have access to an on-going line of credit up to $150K with Kabbage.

What sets Kabbage apart from other small business lenders?

We have more than 1.5 million live data connections across our 115K+ customer base. No other lender in the space has persistent connectivity with its customers.  Because of the real time, persistent nature of these connections, our system re-underwrites every customer every night, providing an ongoing line of credit that always properly reflects their business. We are also the only provider that allows SMBs to go through the entire application process via a mobile app. Our Kabbage card allows qualified customers to draw from their line of credit at checkout or any point-of-sale (POS). We also license our technology to global banks, current bank partnerships include Santander, Scotia Banka and ING.

What is in store for Kabbage in the next 5 years or so?

Our large customer base and growing data connections gives Kabbage permission to provide broader products and services for SMBs. These services will be in adjacent categories including invoicing, payments, and more. We are focused on driving the next stage of evolution in SMB finance solutions, extending beyond lending. Our customers can expect higher lines and longer terms from Kabbage, as well as hyper-personalized funding solutions that are tailored to them and their specific business needs.

How do you like to spend your time besides work? What are your personal interests and hobbies?

I’m incredibly focused on family.  I have two kids and, although they’re getting older, we try to do as much as possible as a family.  My son is a junior in college and my daughter is just starting her freshman year in college.  This past summer, my son interned for a company in San Francisco.  I asked my wife if she’d be up for relocating to San Francisco for a month (we have an office there) so we could be together as a family unit for an extended period this summer and she emphatically said “Yes!”.  So we rented a place and had a terrific time.  So, basically, I look for every opportunity I can to connect with my kids.  It’s become abundantly clear to me that life is short and you have to focus on what is important and nothing is more important than family.