Donna Fuscaldo Senior Contributor
I write about the fintech, cryptocurrency and investing markets.
Divvy, the fintech startup that helps small businesses manage their expenses, is expanding into the lending side of the market, launching Divvy Capital, a new feature that lets businesses float invoices for short periods of time to access cash.
Similar to Stripe Capital, small business customers upload an invoice and Divvy Capital pays it for them. The business owner has 30, 60, or 90 days to pay back Divvy. Interest charged on the loans starts at 0.9% for 30-day loans, 1.4% for 60-day floats and 1.9% for those paying it back in 90 days. Divvy said if customers’ payments and fees were annualized it would amount to APR starting at 10.8% for the 30-day plan and 11.4% for the 90-day option.
“We’re launching Divvy Capital to give businesses access to the funds they need when they need them,” said Tyler Hogge, Vice President of Product at Divvy in a press release. “For example, Flex Plans for Bill Pay gives businesses flexibility to pay their vendors on their timeline.”
Divvy is among the fintechs going after the small business market, offering expense management, credit cards, and increasingly lending. Divvy isn’t providing straight business loans like BlueVine, but to mitigate the risk it is tying it to the finances of its small business clients. “We’ve already underwritten them and now we know how well they are paying their bills over 18 to 24 months,” said Hogge. Because Divvy users are pre-approved, it can offer instant access to capital, eliminating what can be a time-consuming approval process.
While Divvy Capital’s offering is similar to what the likes of Stripe and Square already have, Divvy doesn’t view them as direct competitors. Those businesses are going after small business borrowers that need $5,000 to $10,000 in loans. “Our average customer is significantly larger,” Blake Murray, co-founder, and CEO of Divvy said. Divvy is also proactive with its lending tool. It finds eligible customers and reaches out. The fintech uses several data points collected within the platform, including payment history, revenue growth, and other business signals to determine if a customer qualifies for the financing.