{"id":17874,"date":"2020-03-30T18:25:41","date_gmt":"2020-03-30T18:25:41","guid":{"rendered":"https:\/\/rbsitsoftwaresolution.com\/blog\/smb-loans-platform-kabbage-to-furlough-a-significant-number-of-staff-close-office-in-bangalore.html"},"modified":"2020-03-30T18:25:41","modified_gmt":"2020-03-30T18:25:41","slug":"smb-loans-platform-kabbage-to-furlough-a-significant-number-of-staff-close-office-in-bangalore","status":"publish","type":"post","link":"https:\/\/www.rbsitsoftwaresolution.in\/blog\/smb-loans-platform-kabbage-to-furlough-a-significant-number-of-staff-close-office-in-bangalore.html","title":{"rendered":"SMB loans platform Kabbage to furlough a \u2018significant\u2019 number of staff, close office in Bangalore"},"content":{"rendered":"

Another tech unicorn is feeling the pinch of doing business during the coronavirus pandemic. Today, Kabbage<\/a>, the SoftBank-backed<\/a> lending startup that uses machine learning to evaluate loan applications for small and medium businesses, is furloughing a \u201csignificant number\u201d of its U.S. team of 500 employees, according to a memo sent to staff and seen by TechCrunch, in the wake of drastically changed business conditions for the company. It is also completely closing down its office in Bangalore, India, and executive staff is taking a \u201cconsiderable\u201d pay cut.<\/p>\n

The announcement is effective immediately and was made to staff earlier today by way of a video conference call, as the whole company is currently remote working in the current conditions.<\/p>\n

Kabbage <\/a> is not disclosing the full number of staff that are being affected by the news (if you know, you can contact us anonymously<\/a>). It\u2019s also not putting a time frame on how long the furlough will last, but it\u2019s going to continue providing benefits to affected employees. The intention is to bring them back on when things shift again.<\/p>\n

\u201cWe realize this is a shock to everyone. No business in the world could have prepared for what has transpired these past few weeks and everyone has been impacted,\u201d co-founder and CEO Rob Frohwein wrote in the memo. \u201cThe economic fallout of this virus has rattled the small business community to which Kabbage is directly linked. It\u2019s painful to say goodbye to our friends and colleagues in Bangalore and to furlough a number of U.S. team members. While the duration of the furlough remains uncertain, please bear in mind that the full intention of furloughing is temporary. We simply have no clear idea of how long quarantining or its reverberations in the economy will last.\u201d<\/p>\n

Kabbage\u2019s predicament underscores the complicated and stressful calculus faced by tech companies built around providing services to SMBs, or fintech (or both, as in the case of Kabbage).<\/p>\n

SMBs are struggling right now in the U.S.: many operate on very short terms when it comes to finances, and closing their businesses (or seeing a drastic reduction in custom) means they will not have the cash to last 10 days without revenue, \u201cand we\u2019re already well past that window,\u201d Frohwein noted in his memo.<\/p>\n

In Kabbage\u2019s case, that means not only are SMBs not able to be evaluated and approved for normal loans at the moment, but SMBs that already have loans out are likely facing delinquencies.<\/p>\n

The decision to furlough is hard but in relative terms it\u2019s good news: it was made at the eleventh hour after a period when Kabbage was considering layoffs instead.<\/p>\n

The company has raised hundreds of millions of dollars in equity and debt, and it was in a healthy state before the coronavirus outbreak. The memo notes that the \u201cboard and our top investors are aware of the challenges we are facing and have committed to helping us through this period,\u201d although it doesn\u2019t specify what that means in terms of financial support for the business, and whether that support would have been there for the business as-is.<\/p>\n

The shift to furlough from layoffs came in the wake of an announcement yesterday by Steven Mnuchin, the U.S. Secretary of the Treasury, who clarified that \u201cany FDIC bank, any credit union, any fintech lender will be authorized\u201d to make loans to small businesses as a part of the U.S. government\u2019s CARE Act, the giant stimulus package that included nearly $350 billion in loan guarantees for small businesses.<\/p>\n

While that provides much-needed relief for these businesses, the implementation of it \u2014 the Small Business Administration has already received nearly 1 million claims for disaster-relief loans since the crisis started \u2014 has been and is going to be a challenge.<\/p>\n

That effectively opens up an opportunity for Kabbage and companies like it to revive and reorient some of its business. (Its USP was always that the AI it uses, which draws on a number of different sources of online data for the business, means a more creative, faster and more accurate assessment of loan applications than what traditional banks typically provide.) Kabbage said it is in \u201cdeep discussions\u201d with the Treasury Department, the White House and the Small Business Administration to help expedite applications for aid.<\/p>\n

While loans still make up the majority of Kabbage\u2019s business, the company has been making a move to diversify its services, and in recent times it has made acquisitions and launched new services<\/a> around market intelligence insights and payments services. While there has certainly been a jump in e-commerce, overall the tightening economy will have a chilling effect on the wider market, and it will be worth seeing what happens with other tech companies that focus on loans, as well as adjacent financial services.<\/p>\n

<\/a><\/p>\n

Article source: http:\/\/feedproxy.google.com\/~r\/techcrunchIt\/~3\/hvifh8KkCR8\/<\/p>","protected":false},"excerpt":{"rendered":"

Another tech unicorn is feeling the pinch of doing business during the coronavirus pandemic. Today, Kabbage, the SoftBank-backed lending startup that uses machine learning to evaluate loan applications for small <\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2}},"categories":[19],"tags":[25],"class_list":["post-17874","post","type-post","status-publish","format-standard","hentry","category-enterprise-software","tag-enterprise"],"aioseo_notices":[],"aioseo_head":"\n\t\t\n\t\n\t\n\t\n\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t