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NEW YORK, April 9 (IFR) - Kabbage, a start-up that specializes in financing for small online merchants, has raised USD270m from a credit facility backed by receivables that will dramatically lower the cost of its funding and pave the way for the company to expand.
The revolving three-year transaction, solely structured and placed by Guggenheim Securities, is one of the largest credit facilities ever raised in the small business financing sector.
"This inaugural debt financing for Kabbage represents the first securitization of merchant cash advances (MCA) and related products to be distributed to capital markets investors," said Matthew Perkins, senior managing director and head of ABS and RMBS banking at Guggenheim Securities.
An MCA is a lump sum payment to a business in exchange for an agreed upon percentage of future credit card or debit card sales.
Headquartered in Atlanta, Kabbage was publicly launched in May 2011, and this new deal comes a year after it announced a USD75m credit facility in April 2013.
Kabbage provides small businesses with financing in as little as seven minutes by leveraging data generated through business activity such as online sales, shipping, and dozens of other sources.
The securitization, bought by top tier institutional investors, will give the company more flexibility to expand its product structure and scale, and to reach small businesses more rapidly.
Investors were heard to be impressed with Kabbage's ability to successfully use non-traditional data to quickly assess the credit worthiness of small businesses, as well as the dispersion of its MCAs across multiple industries, geographies, and sizes.
Thousands of merchant cash advances were pooled for this transaction, and Kabbage, which has advanced more than USD250m to small businesses in its first three years of business, is hopeful that it could pave the way for other related transactions.
"There is growing investor demand for asset-backed investment opportunities from market-leading, technology and data-driven small business loan originators," said Perkins. (Reporting by Charles Williams; Editing by Natalie Harrison and Marc Carnegie)