Kabbage's Petralia on Licensing Fintech to Global Banks (Audio)

higher interest rates and it uneven economic growth. Everyport today show manufacturing activity in the New York region unexpectedly contracted this month, while a measure of homebuilder sentiment climbed seven out of ten industry groups in the SMP five hundred rows today, with technology and financial shares leading the way.

We check the markets every fifteen minutes. The down Industrial laverage game sixty points one third percent to close at eighteen thousand, six hundred thirty six, the SMP five hundred rows six points a quarter percent and closed, and the NASDAC added twenty nine point six tents of a percent

and closed at fifty two sixty two. West Texas Intermediate crude oil up a dollar thirty to a barrel, that's a gain of three percent at forty eighty spiked rolled up a dollar fifty, announced at seventy and the tenure treasury down twelve thirty seconds with the yield of one point five five per cent. And that's a Bloomberg Business flash. You're listening to Taking Stock with Kathleen Hayes and Pim

Fox on Bloomberg Radio. Well, she may head up one of the most successful, fast growing fintech companies in the industry. Online learning the small business started back in two thousand nine a company called Cabbage. Katherine Bertalia actually was a graduate student in literature, John Steinbeck being one of her favorites. I don't know how she got from Steinbeck to fintech. Last you want to find out? Now? Cabbage is where the name of the company based in Atlanta, Georgia, and

she's there today. Katherine, thanks for joining us. Thanks for having me so. First of all, your your small business lending is unique from a lot of other firms. You lend up to about a hundred thousand dollars. It's all online. Your your software quickly evaluates their readiness and it's directly to the senses themselves. That's correct. So how does it work so our customers are able to give us access to the data that they used to run their business.

Have you've ever logged into some other website. With Facebook, it works much the same way. So we don't take the customers credentials, but they log into their check the account, or to quick books or UM their payment process or some other information UM some other site that they're using to run their business, and we're able to take that data to make a really rapid underwriting decision for them.

Instead of having to produce and provide financial statements and UM bank statements and spend a lot of time gathering documentation for traditional loan we're able to do that work for them now. Catherine, taking a look at the operations of Cabbage, I understand that overall that the loans that you originated in the first half of the year rose in volume compared to but the pace of the growth

has slowed. So in you originated about nine million dollar dollar's worth of loans, and I'm wondering what you can tell us so far about this year because you've got some competition, I mean, on debt capital loaned about one point nine billion. Yes, there are plenty of players in this space. The last six and nine months have certainly

been interesting to watch from an outsider's perspective. I'm sure. UM. So there's certainly there's been some more crowding in the market, although that's really loosened up a little bit, I think in the last four or five months. UM. I think from our perspective, it's just a matter of being smart. Um, we're not trying to buy the market. We're trying to you know, move into new markets. And we really have

two businesses. We have a direct lending business in the US, and we also license our technology to global financial stitutions banks like Santander and I m G and Scotia Bank worldwide. So we have our efforts focused in two places. How did you your companies based in Atlanta, Georgia? You did spend time in Silicon Valley. I'm interested to how you you ended up your headquarters on on the other side of the country. Uh and uh. Also we're good idea of this for this came from well, why Atlanta? We

get asked that question a lot. Honestly, we lived there. It seems like a great it seems like a great place. Breast one a lot of people don't know is um it's there's everyone has to have a nickname with the word alley and of course our transaction alley, since of US payment transactions actually flow through it l into based businesses.

When the Fed automated payments in the fifties, they did that in the Atlanta region and as a as a result, a lot of financial technology companies grew up in that area. So it's a great place to start a fin tech company. UM. And your other question about the name Cabbage, was that correct? Um? So, Cabbage is If you google cabbage with the C, you'll see the second definition of it is it's a metaphor for cash. It's a depression era term. Um. And we

were looking for names, we um. We were struggling. Obviously, it's hard to find a domain name in Cabbage with the C with a lot cheaper than Cabbage with the K. So we picked Cabbage with the K. Now, Cabbage was

founded in two thousand eight. I understand you've raised about two hundred and forty million dollars from companies such as Blue Run Ventures, Soft Bank Capital, Ups, Strategic Enterprise Fund UH late last year valuation of about a billion, and you raised more than a billion in debt capital today. Is that accurate? Um? We We don't comment publicly on the company valuation, but we do have um we have publicly announced the size of our debt facility, which is

close to a billion dollars. And is there any update that you can give us on the launch of Carrot, which was the consumer lending business that was back in Have you decided that's not something that's not a way you want to go? Well, you know, the reason we launched Carrot was twofold. One of them was because we had a lot of people coming to our site who are actually consumers, not small businesses, so we wanted a product to serve them. But secondly, it allowed us to

demonstrate sort of the flexibility of the platform. It was the first white label, if you will, launch that we had on the Cabbage platform and so as a result, that sort of catapuled this into the limelight from a from a software and technology perspective and what precipitated all

of the relationships we have with these global banks. So we're excited about the way we were able to demonstrate the flexibility of the technology using Carrot, But that market is pretty crowded right now too, so we never intended to try to run out and compete with all of the consumer lenders in the in the world, Catherine, I'm interested to um ups of course, is also based in Atlanta.

That was one of your first very clever partnerships back in twelve uh you entertaining agreement allowing small businesses to share their shipping histories with Cabbage. You've done so many more partnership Scotia Bank is one of your latest and how how is that one working? What's it? What does

it mean for Cabbage? So the bank partnerships effectively allow um these large financial institutions to provide a a line of credit, a small business line of credit product to customers that they had a hard time serving before, not because of an underwriting process, but because they had a hard time serving small businesses who were looking for less

than a hundred thousand dollars. Most banks spend the same amount of money to originative by thousand dollar loan is they want a five million dollar loan from a small business perspective. So the way the process works on the way to gather data makes it cost effective now for banks to serve really small businesses that were previously just

checking account customers. They weren't borrowing customers. And so the way it works with the bank partners and Scotia Bank in particular is um it's their brand, it's their bank, but it's our technology in the back end of powering the loans they're making to their small business customers. I want to thank you very much for spending time with us. Katherine Petrolia is the co founder and the head of operations for Cabbage. They're based in Atlanta. Thank you for

listening to Taking Stock. I'm pim Fox my co host Kathleen Hayes. This is Bloomberg. Coming up on Bloomberg Law, Will A T and T you get to say thanks to its customers or will city groups lawsuits stop it? City Group says the A T and T Thanks Customer awards program in fringes City groups numerous thank you trademarks. That's coming up on blom Brig Radio. The it