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Stripe launches small-business lending division

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Stripe launches small-business lending division

Stripe Inc. has started to make loans to small businesses in the U.S.

The San Francisco-based startup rose to prominence by helping internet businesses accept online payments. Through its latest service, Stripe Capital, the company will now make loans to businesses that are already Stripe customers and to merchants using Stripe services to process payments. Stripe initially intends to focus on loans of about $10,000 to $20,000, co-founder John Collison told Bloomberg News.

"It's important to think about financial inclusion not just in terms of consumers, but also in terms of businesses," said Will Gaybrick, Stripe's chief product officer, in a company release.

Small business lending was ripe for disruption as banks pulled back on small-business loans after the 2008 financial crisis. Stripe has positioned itself against other payments companies — like PayPal Holdings Inc. and Square Inc. — that have also recently entered the space. And those companies added to the existing competition from small business-focused digital lenders such as On Deck Capital Inc. and Kabbage Inc.

Stripe Capital boasts fast access to cash, with approved funds typically hitting customer's accounts the next day. Customer eligibility will be determined based on a company's history on Stripe, considering factors including payment volume, percentage of repeat customers, payment frequency and changes in revenue growth. Like many of the digitally native services, Stripe Capital touts its advanced algorithms, which it says will better analyze a customer's likelihood to repay the loan.