Stripe has agreed to acquire Parafin, a company that lends to small businesses through the software platforms they already use, such as DoorDash, Gusto, Jobber and Mindbody. Parafin’s portfolio will join Stripe Capital, Stripe’s own financing product for platforms. The deal is expected to close in the coming months, subject to regulatory approvals.

What Parafin brings

  • About $3 billion of credit extended to some 60,000 businesses in the US and Canada since its first cash advance in 2021.
  • Three products: capital (cash advances repaid from sales), Pay Over Time and Spend.
  • Ready integrations with platforms that see a merchant’s sales every day.

Why payment companies want lending

A platform that processes a merchant’s payments knows more about that business than most bureaus: daily sales, refunds, seasonality, how fast it grows. That data makes it possible to offer an advance in one click and to collect it as a share of future sales, without a separate repayment schedule. American Banker notes the deal came after a proposed acquisition by PayPal fell through, which shows how contested this market has become.

What it means for lenders and banks

  • Revenue-based repayment is becoming normal for small businesses, so lenders need schedules tied to sales, not only fixed instalments.
  • Distribution moves to platforms: lenders that can plug into marketplaces, POS and accounting software through an API reach merchants where they work.
  • Decisions rely on transaction data, so scoring must read sales, invoices and bank data, not only a credit report.

lendhero’s business lending product supports revenue-based and invoice financing, credit lines and tranche loans, and pulls company data from registries, accounting systems and open banking, so a lender can launch embedded credit with its own partners.

Sources: Stripe newsroom, American Banker, Banking Dive, PYMNTS, eMarketer.

lendhero solutionBusiness lendingCredit lines, tranche loans and revenue-based financing for SMEs.